Rent or Buy

I have owned two houses in the past.
For the last 8 years I have owned a 1,800 sq ft condo. Bought in 2003 (local high of market) and sold last month for 22% less than I bought it for after nearly two years on the market. I had about 25% equity so I broke just better than even, but also replaced a furnace and other upgrades over the years so really less than even. Total loss of all down payment money and every monthly payment.

I am now shopping new homes just under $200k. I have found two ranch homes that I like. Ironically they were built the same year (1973) by the same builder. Really, they are very similar. Both are estate situations and one family wants to sell and the other wants to rent.

What are your thoughts on the economy?
Will buying a house today still be affected by further slumps?
To buy into a $200k house I need to write a $20-40k check - which I have and then about $1,300 per month with taxes.
To rent at $900 I am out only first and last ($1,800) with $38.2k still in the bank. A commitment to waste $900 per month or a total of $10,800 per year.

Another argument is that I am 44 yrs old and I would like the house I buy to be the house I retire in.
Yes, I think my wife and I will stay in this area for a long time.
If I do not buy now, will I ever own something?

What thoughts or answers do you have for my ramblings oh wise GRM community?

jrw1621 wrote: What are your thoughts on the economy? Will buying a house today still be affected by further slumps?

Those are the magic answers. If we only knew........

I am one to buy. I have bought two homes and when I am finished paying off my current home by the age of 59-60.......I should be sitting on a $375-$400,000 investment???? (give or take assuming the economy comes around in 10 years)

Rent goes on forever with nothing back. Of course, some people NEED to be renters all their life. I have family that made a bad decision to buy a house. They are apartment people only.

If you want your next place to be the one you retire in, you best buy it. If you have the cash to outlay for a house, then buying is the way to go, just try and get one for the right price...

Renting leaves you with more cash upfront, but you can pay it forever and never get anything back.

This rental opportunity just came to my attention today. Previous all my intentions were to buy. At the root, I guess my question is will I get screwed by the economy? Would I get less screwed by renting?
I guess my answer is renting is a for sure screw job but buying at least has the hope and possibility of not being a screw job. My first home was a positive and appreciating experience even if my latest was more of a ankle grab.

I would say it's a lot better time to be buying now than it was in 2003 - real estate prices and interest rates are both low.

in the past I was always told to be careful with condos as they are harder to sell than houses.

You also have to consider where you live. I am sure you have always heard; location, location, location.

California is showing the first signs of a renewed economy. Home prices have started to rise and the numbers of homes on the market have dropped.

Orlando has fewer homes on the market than they've had in 6 years. A friend who has a house in Jacksonville moved to Texas 3.5 years ago and was unable to sell her home so she tried to deed her house back to the lender and they wouldn't take it. This week she got a call from her lender who told her the market was improving enough that they were going to give her 90 days to try to sell it again and if at the end of that time she couldn't then they would accept a short sale or allow her to do a voluntary foreclosure.

And of course Texas is GREAT!

But if you think you may need to move quickly and you are in one of the areas that's been hit hard you may need to think about renting.

The time to buy is when prices are down so you won't find a much better time to buy than this, if you're planning on the normal 3-5 year hold time.

We really won't see a true turn around until after the next election.

He's shopping homes not condos. He just sold a condo. And you are right rent a condo but buy a home.

Correct, these are both free standing homes.
I did the condo thing and got the t-shirt. Actually, I think it got the t-shirt (right off my back!) I liked the place and it fit my traveling lifestyle. The economy just sort of served me a double whammy.

Carguy,
Being that you are in the mortgage business, can you do loans into Ohio?
That is my next topic that I will have to tackle very soon.

No, can't do loans in Ohio. Ohio doesn't let out of state people do loans there. Most states have gotten that way.

But I can give you advice.

stuart in mn wrote: I would say it's a lot better time to be buying now than it was in 2003 - real estate prices and interest rates are both low.

I would buy, if you expect to stay. The market is down, as you are too aware. That means you're buying at the low side of the curve. You may not make a killing but you are far less likely to lose more money. Look at it this way - renting for 5 years, you are out $50,000+ which is more than 25% loss against the value of the bought house.

jrw1621 wrote: Another argument is that I am 44 yrs old and I would like the house I buy to be the house I retire in. Yes, I think my wife and I will stay in this area for a long time. If I do not buy now, will I ever own something?

That sounds like you're leaning towards buying. What's the local job market like? If you or your wife lost your job(s), would you have to move to find another job[1]?

Also, how quickly do you think you'll be paying off the house? If you can pay it off quickly enough, even having to move for work might not make a difference if you can then rent out an almost paid-off house.

[1] Apart from still having my house in the UK, this is my biggest worry re buying where we are now - no other employers in my field.

"Conventional wisdom" now is to buy if you expect to live there...pretty much forever. In other words, the days of a home being an appreciating asset MAY be behind us, and of course it depends on the area you are moving into.

That said, you will have to look and see if the kind of place you want to live in is also available at the same price per month whether you rent or buy. I'm currently renting an SMALLER apartment than the house I am renting out to others, and it's not in quite as nice a neighborhood.... If I were buying a house in my area for what I would pay in rent, I would either have to make a substantial down payment and/or pay MORE than what I'm receiving in rent.

integraguy wrote: "Conventional wisdom" now is to buy if you expect to live there...pretty much forever. In other words, the days of a home being an appreciating asset MAY be behind us, and of course it depends on the area you are moving into.

I really think that depends on the local market.

jrw1621 wrote: . Another argument is that I am 44 yrs old and I would like the house I buy to be the house I retire in. Yes, I think my wife and I will stay in this area for a long time. If I do not buy now, will I ever own something?

since you're planning on retiring there.... in the house you're interested in buying... then don't see how you can loose...

you'll be buying at or near the bottom of the housing crash.... even if the crash worsens what have you lost..??

assuming you can always come up with the mortgage payment, it won't matter if you're upside down for a while...

in the long run you'll own the home regardless what it's worth...

if this is an investment, well......( lots of financial advisers will tell you home buying isn't a very good "investment")

The wife and I talked and yes, we plan to be in a new place more than 5 years so renting is likely not the path to take.
I do find it interesting that the collective opinion around the board seems to be that we are economically either at the bottom or maybe slightly on the upward climb.

I am in agreement that the days of houses appreciating are likely behind us or at least a long way away from returning.

BoxheadTim wrote: That sounds like you're leaning towards buying. What's the local job market like? If you or your wife lost your job(s), would you have to move to find another job[1]?

Though my job pays better, I often think of my wife having the better job. She is a tenured, union represented, public school teacher. Short of fondling the kids, it is pretty hard to get fired from her job. Mine is sales management at a typically fickle American company.

BoxheadTim wrote: Also, how quickly do you think you'll be paying off the house? If you can pay it off quickly enough, even having to move for work might not make a difference if you can then rent out an almost paid-off house.

Likely a 30 yr fixed with extra paid to principle each month to knock off some years. More to be discussed here but maybe 10-20% down, depending on purchase price.

If you wanna bring more math and less emotion to the decision, play with this to see where the point of inflection is for your price range: http://www.nytimes.com/interactive/business/buy-rent-calculator.html

I'd buy. Then it's yours and you can do what you want with it (as long as the city lets you). When you rent, it still belongs to someone else. Even if you have to sell and only break even - you'd have lived there for free which is a lot cheaper than paying rent.

Buy commercial property, rent residential property.

I recommend buying; not because I anticipate significant home value appreciation but because I see rent increasing dramatically.

To not have major inflation in the near future would pretty much be a violation of fundamental physics. The higher interest rates that will result must be rolled onto renters otherwise, landlords will invest elsewhere.

Think of it this way, the house is nothing more than a vehicle to give you access to a thirty year commitment by some sucker to lend you money below 5%.

In other words, home ownership can be seen as iron clad rent control where you have a thirty year lock on your monthly rent.

pilotbraden wrote: Buy commercial property, rent residential property.

I would think this would be the exact opposite of what you want to do. Not only because of the residential "rent control" idea above, but because you can write rent off of your business taxes but not your personal taxes. Same reason that leasing vehicles is mostly a sucker bet for private individuals but makes all the sense in the world for businesses.

The house I bought when I was single became a ball and chain a year later when I lost my job, got engaged and moved out of state. After getting married I bought another home, but needed to sell that one three years later as our circumstances changed. It was a lucky fluke that the sale concluded just before the market peaked. We stupidly dumped the proceeds from that sale into an expensive new home, which we sold for a loss when my wife couldn't find work and our circumstances changed again. Now we're living in the original house, which met my needs as a bachelor but does not adequately meet the needs of my family.

Bottom line: Needs change. Jobs change. You may need to relocate. Being saddled with a mortgage dramatically limits your ability to adapt to these changes. Rent of you are young, buy if you're older or really stable and shrewd financially.

RX Reven' wrote: I recommend buying; not because I anticipate significant home value appreciation but because I see rent increasing dramatically. To not have major inflation in the near future would pretty much be a violation of fundamental physics. The higher interest rates that will result must be rolled onto renters otherwise, landlords will invest elsewhere. Think of it this way, the house is nothing more than a vehicle to give you access to a thirty year commitment by some sucker to lend you money below 5%. In other words, home ownership can be seen as iron clad rent control where you have a thirty year lock on your monthly rent.

+1. If there is high inflation, a long-term mortgage at a low rate is a valuable financial instrument. If there isn't high inflation, it's still unlikely that mortgage rates are going to be a lot lower than they are now.

Housing still best long term investment

While even tho I've spent my whole adult life in real estate I realize there's a time to rent and a time to buy. With rates the way they are and with housing prices beginning to rise more than they are falling (nationally) this is one of those times that if your situation is stable enough you will really kick yourself for not buying.

My net worth is no where near where it was Pre-Obama I am where I am financially and in a nice home due to the fact of homeownership.

Buy low, sell high. House prices are low. Buy a house.

-OR-

You can be like some folks I know, and decide "The housing market collapsed. I'm going to walk away from my house, rent a place, buy lots of gold, and sell my truck to buy something more fuel efficient."

rolleyes.