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Rent until things finish shaking out. There is more down to go after the smoke and mirrors fail.
Still, if you have the 20% down, have emergency savings in place, have a stable source of income (as stable as one can expect, anyway), and are expecting to live in one place for the next 10+ years (and aren't anticipating big changes in space needs, etc.), and prefer to own, might as well buy now.
If you don't meet those parameters (we don't), better off waiting.
Still, if you have the 20% down, have emergency savings in place, have a stable source of income (as stable as one can expect, anyway), and are expecting to live in one place for the next 10+ years (and aren't anticipating big changes in space needs, etc.), and prefer to own, might as well buy now.
If you don't meet those parameters (we don't), better off waiting.
Even with all that, property taxes are going to the moon. Government is broke, and guess who can't move their major asset?
I guess plenty of folks have jumped on this, so I not trying to pile on, but let's put some real numbers to it?
Mkay. If I am running a well ordered personal financial situation, I should have 3 to 6 months of all expenses parked for an emergency, right? Not saying anyone/everyone does, but that is pretty much the specification, right?
That means folks with that Emergency Fund do not go into crisis on the 5th day of the month.
So let's do some typical real world High and Low numbers for real world people?
Low(er): $40,000 income, $100K house (if buying) or $800 month if renting. Total household expenses maybe $2500 a month, so an Emergency Funds should be somewhere between $7500 and $15000.
High(er): $80,000 income, $250,000 house (if buying) or $2000 month if renting. Total household expenses maybe $4000 a month, so an Emergency Funds should be somewhere between $12,000 and $32,000.
So rent is somewhere between $800 and $2000, which is typically very close to the (bank) owner payments + taxes + insurance. As far as cash flow -- about the same, if one is not figuring on taxes, business expense tricks, etc.
Now let's see what is at Risk in the paths per the job loss scenarios.
Down Payment(s) on those same houses (at 20%) are $20,000 and $50,000
Emergency Fund for these same folks are somewhere $7500 and $32,000. What (we) anti-deep-debt folks are saying is that the Emergency Fund IS NOT the Down Payments on these houses.
Having that Emergency Fund as a separate set of money takes away the crisis from the Low(er) and the High(er) Folks, for whether they are renting or paying a mortgage.
The error in your calculus is not considering the (MUCH NEEDED) Emergency Fund. Your model is somewhat using the slow Foreclosure Process as a Faux Emergency Fund -- at the end of which you lose the house, along with the Down Payment.
A wiser path would be to accumulate BOTH the Emergency Fund (FIRST) and then in addition accumulate the Down Payment, so that one is covered in both paths.
Called Delayed Gratification by some, Emotional Maturity or Emotional IQ by others -- but in practice . . . it is just Grow Up. Makes a lot of the crisis(es) go away.
Sort of an Un-American thing, anymore.
Sounds great and I totally agree with the idea, but that is just not how the real world is these days. I have a lot of clients who know saving is the right thing to do, but they just dont do it. Best practices make all the sense in the world and yet maybe 10% follow them. I had a client who said he'd pass on life insurance for now and buckle down so he could build up a nest egg. What nest eggs get built when you 2 months later buy a 2013 Acura because the wife complained she needs more space for the kids? This is real life as practiced by the majority of our population, not the perfect world talking heads on TV or financial writers with their latest bestsellers prescribe to the masses.
Sounds great and I totally agree with the idea, but that is just not how the real world is these days. I have a lot of clients who know saving is the right thing to do, but they just dont do it. Best practices make all the sense in the world and yet maybe 10% follow them. I had a client who said he'd pass on life insurance for now and buckle down so he could build up a nest egg. What nest eggs get built when you 2 months later buy a 2013 Acura because the wife complained she needs more space for the kids? This is real life as practiced by the majority of our population, not the perfect world talking heads on TV or financial writers with their latest bestsellers prescribe to the masses.
well, getting back to the original question (sort of, anyway), it wouldn't be rational for people with no savings and who otherwise don't have their ducks in a row, financially-speaking, to be buying a house. They'd be better off renting, no matter how good the interest rates or how good the housing prices. Of course a lot of people aren't rational.
My bit pet peeve is that where I live now, Minneapolis, there's a big bias against renters in many areas; renting is often seen as something for poor or young people, and/or second-class citizens. I'm sure that contributes to some people rushing to buy when it it does not make any financial sense.
This is a good time to buy if you have the down payment in hand and some emergency savings already in place, and are going into it with the expectation that you will be living there for the long-term. But renting isn't throwing money away, either.
Now this is a good time to buy period. After all how hard is it to come up with 3-4% (FHA)? Not to mention interest rates are like nothing. lol Renting is throwing money away and anyone that don't think so is a complete idiot. Yes for people that can not do any better yeah sure, you have to have somewhere to live. However it is throwing money down the drain. I thought I was doing something big by renting this very nice apartment however come to found out I can buy a brand new home cheaper at the beach.
1. you are making someone else rich. My landlord buys a brand new BMW every year for Xmas...gee I wonder how she does it? Oh it could be the 100s of thousands they are making off of your rent money. So far in three years I've spent roughly 32 grand on rent...seriously? That would be a big chunk of a house payment. I'm paying $795.00, every month for a luxury apartment.
2. It isn't yours, no matter how nice it is. YOU DON'T OWN IT, therefore yes money is being wasted every single day on something you can not even lay claim to, that you one day will have to give up. Why waste money on something that isn't yours. At least mortgage payments go to the greater good of one day owning the home outright. With renting you completely lose all of your money, and have nothing to show for it when you move out. So right now all I have to show is rent receipts and a loss of 32 grand. Oh I wonder if my landlords BMW counts? hmmmmm
Who in their right mind would choose renting over owning? Yeah I know broke people, however if you HAVE the money, why rent? Must be a lot of idiots in this world, because now that I found out I have the option to buy a home in the area I want to live in the rest of my life in and the payments are lower then my rent, which is easy to pay btw, they can have the apartment. I'll take my brand new never before lived in beach home.
Now this is a good time to buy period. After all how hard is it to come up with 3-4% (FHA)? Not to mention interest rates are like nothing. lol Renting is throwing money away and anyone that don't think so is a complete idiot. Yes for people that can not do any better yeah sure, you have to have somewhere to live. However it is throwing money down the drain. I thought I was doing something big by renting this very nice apartment however come to found out I can buy a brand new home cheaper at the beach.
1. you are making someone else rich. My landlord buys a brand new BMW every year for Xmas...gee I wonder how she does it? Oh it could be the 100s of thousands they are making off of your rent money. So far in three years I've spent roughly 32 grand on rent...seriously? That would be a big chunk of a house payment. I'm paying $795.00, every month for a luxury apartment.
2. It isn't yours, no matter how nice it is. YOU DON'T OWN IT, therefore yes money is being wasted every single day on something you can not even lay claim to, that you one day will have to give up. Why waste money on something that isn't yours. At least mortgage payments go to the greater good of one day owning the home outright. With renting you completely lose all of your money, and have nothing to show for it when you move out. So right now all I have to show is rent receipts and a loss of 32 grand. Oh I wonder if my landlords BMW counts? hmmmmm
Who in their right mind would choose renting over owning? Yeah I know broke people, however if you HAVE the money, why rent? Must be a lot of idiots in this world, because now that I found out I have the option to buy a home in the area I want to live in the rest of my life in and the payments are lower then my rent, which is easy to pay btw, they can have the apartment. I'll take my brand new never before lived in beach home.
there are lots of reasons to rent and lots of reasons to own
owning limits your mobility
if you know you are going to be in the same area for a while owning makes a lot of sense, if not renting makes perfect sense
people also forget about the costs for maintenance when it comes to owning
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