Rent vs Buying a House

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Spoofee

Spoofee

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A lot of people around me are starting to buy or considering buying a home

Found this great website that compares how much you would make/lose depending on which way you go.

Depends on how much the property will appreciate/depreciate. This calculator assumes the home will appreciate by 4% every year by default

- Link to Housemath.us
 
Spoofee said:
A lot of people around me are starting to buy or considering buying a home
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Gee Mr. Spoofee, perhaps it's a sign that you should consider .. getting married,............ settling down ..............and buy a house...:rolleyes:....tick, tick, tick....

:tongue:
 
I was told the rule is this: Never pay interest on a depreciating asset. I.E.: Buy property, lease cars.
 
Do buy property (it appreciates) but only lease cars (immediate depreciation) ...but I can't remember which finance guru said it and last night I was listening to Ramsey and he said DON'T lease cars, buy used ones..so now I don't know what the heck is right!
 
cybermom said:
Do buy property (it appreciates) but only lease cars (immediate depreciation) ...but I can't remember which finance guru said it and last night I was listening to Ramsey and he said DON'T lease cars, buy used ones..so now I don't know what the heck is right!
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If you can live with a 'used' car, then buy it. If you NEED to have a new (last 2 years) model, then lease it and let the car company pay the depreciation.

And property only appreciates if you're willing to hold it for a while, if you're looking to flip (<1 year) or only hold for the short term (<3 years) and the market is bad, you might end up eating a hefty fee to dump a house that no one wants and that you've not had enough time to build any equity in.
 
In many markets in the US, real estate values are going down. In this sort of climate, it may make better financial sense to rent, until prices stabilize. This sort of follows cybermom's rule -- don't buy something that goes down in value.
 
My wife and I are the type to buy a car and drive it for years so buying new for us works since we will be keeping it for years.
 
monkfish said:
In many markets in the US, real estate values are going down. In this sort of climate, it may make better financial sense to rent, until prices stabilize. This sort of follows cybermom's rule -- don't buy something that goes down in value.
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OK thats why your on a deal site :convinced:

I like buying things that have gone down in value so I get the best value. Houses are no different some of the lowest prices in years and yet some people say not too.

I expected more on a deal site where people usually see an opportunity

Prices may go lower but in the long run you should do well. Don't second guess yourself if your thinking of buying then you should. You'll be very glad you did 5-10 years from now
 
RobG said:
OK thats why your on a deal site :convinced:

I like buying things that have gone down in value so I get the best value. Houses are no different some of the lowest prices in years and yet some people say not too.

I expected more on a deal site where people usually see an opportunity

Prices may go lower but in the long run you should do well. Don't second guess yourself if your thinking of buying then you should. You'll be very glad you did 5-10 years from now
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No argument from me, Rob. You make many good points. In particular, there's the fact that trying to time a market bottom is next to impossible.

But, the fact is that home prices in major US markets are down over 13% these past 12 months. Prices are predicted to continue falling for at least another year. If I were in the market for a home, I'd be planning on holding off for a while at least. In the long run value will appreciate, but why start of 5 or 10% in the red if I don't have to?
 
monkfish said:
No argument from me, Rob. You make many good points. In particular, there's the fact that trying to time a market bottom is next to impossible.

But, the fact is that home prices in major US markets are down over 13% these past 12 months. Prices are predicted to continue falling for at least another year. If I were in the market for a home, I'd be planning on holding off for a while at least. In the long run value will appreciate, but why start of 5 or 10% in the red if I don't have to?
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To rent an average house in my area is about $2000 a month times 12 thats $24,000 will a house he's looking at fall another $24,000 probably not.

Your Number not mine if it happens an AVG $150,000 house at 5% $7500 at 10% $15,000

Look at the tax breaks of owning a house write off of mortgage interest and property taxes makes the amount saved even more.

I see losing a lot more than you are saving by waiting
 
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For those of you that need to get a mortgage (I certainly can't buy straight out with cash) The Fed is supposedly going to cut rates "for the last time" in the next few weeks. This might help interest rates for buyers by lowering them although the last few rate cuts did the opposite because the risk for lenders went up. But the thought is that a short time after the rate cut the market will improve and rates will start to drop initially due to the lower risk to the lenders after more people get loans.

But hey what do I know I'm only a rocket scientist who deals with logic and math every day and as we know economics is driven by consumer conjecture, ill informed predictions, and whim.

Oh and don't forget to vote in the upcoming elections because the president/government has such an effect on the price of gas, housing market, and price of goods. LOL:p

Apparently I'm cynical and sarcastic too!
 
RobG said:
To rent an average house in my area is about $2000 a month times 12 thats $24,000 will a house he's looking at fall another $24,000 probably not.

Your Number not mine if it happens an AVG $150,000 house at 5% $7500 at 10% $15,000

Look at the tax breaks of owning a house write off of mortgage interest and property taxes makes the amount saved even more.

I see losing a lot more than you are saving by waiting
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Your misunderstanding is pretty common. Time Value of Money calculations involve exponential growth/decay, which is where most people's intuitive grasp of number breaks down.

Take your $150K property. To make calculations easier, we'll pretend you finance 100%. Buy today with a 30 year loan at 6.5%
At the end, you've paid over $340,000 for the property

Buy next year after a 5% drop in value, and that same property is purchased for $142.5K, and after all is done you'll pay about $324K. With your savings on the property added in, you could have paid over $24K in rent and still come out ahead.

Similarly (but magnified) if values drop 10%. Cost of property $135K, total payments $307K, and you could have spent almost $50K on rent for that one year and come out ahead of the deal.

You should also check with your tax adviser. Property tax is not written off. It is deducted from taxable income in most cases. The mortgage interest deduction is a wash, since you get that deduction in both scenarios.

Of course, these are just rough numbers with a simplified model, but the point is that, in many cases, a person will do better to hold off on a purchase decision when the market is going down.
 
You must be a landlord with your kind of trash thinking.

If it takes another 2-3 years for the market to turn around with rent at $2000 times your at $72,000 and what did you gain nothing. No Tax deduction at all for anything on the 1040. Some states may have a partial renters rebate thats is.

Also if you own your home like most americans its an avg ownership of 7-9 years

less than 15% keep a mortgage for 30 years most either pay it off or refinance

google WSJ for true facts
 
RobG said:
You must be a landlord with your kind of trash thinking.

If it takes another 2-3 years for the market to turn around with rent at $2000 times your at $72,000 and what did you gain nothing. No Tax deduction at all for anything on the 1040. Some states may have a partial renters rebate thats is.

Also if you own your home like most americans its an avg ownership of 7-9 years

less than 15% keep a mortgage for 30 years most either pay it off or refinance

google WSJ for true facts
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Build a spreadsheet, and run the numbers. I ran them with the assumptions you stated, and you came out wrong.

re: 2-3 year turnaround
This will just amplify the effect I was talking about

re: avg ownership 7-9 years
Most people trade into a new home after that time period, so the model keeps on running, but with a new property underneath. Actually, this is where most people will feel the pinch, because they've leveraged their down payment with the mortgage loan, but the value loss is multiplied entirely onto the down payment (equity).

re: refinance
This just rolls the whole model forward. Same system mechanics still apply.

Any decision involving $100k and more is going to be more complex than can be modeled in a few lines of an online forum. I'd strongly recommend anyone in the position to be deciding this issue talk with a financial professional first.
 
Ok even if a property ends up costing $340,000 and people are not smart enough to pay it down in 30 years


It takes 30 years to pay out $340,000 and you have a property that went up in value

Rent will go up where a fixed mortgage is just that a fixed mortgage payment

If rents stays the same you paid $340,000 in 170 months and HAVE NOTHING

I think monkfish needs a professional
 
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