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If you are considering moving to Northern Virginia, consider renting. Instead of looking to purchase a home far away from work, consider renting near work. Currently, it will take roughly 6-8 years to begin to see any economies in owning a home, specifically in the Washington, DC suburbs.
Let's look at some numbers:
Let's say you work in Tysons Corner, where there are an exorbitant number of jobs. If you took out a $500,000 mortgage on a home close by, you would pay roughly $3,200/month on your mortgage, pay for all of your maintenance, and pay property taxes. Your total cost of annual owership will be roughly $47,000 in addition to the opportunity cost of your 10% down payment. Total principal earned will average somewhere around $7,000/year for the first decade or so. Total net cost of ownership will be well over $40,000/year. In addition, a $500,000 home in Tysons is probably not very nice, if that price even exists for a house (most condos in that area sell for more). If you decide to purchase for that price far away, you may add an additional hour to your commute. Is 2 hours a day, 5 days/week, 50 weeks per year (or 500 hours) worth a slightly larger home? Is the additional $1,000 in fuel and God knows what in car depreciation worth it?
Now, consider renting. You could rent a GORGEOUS condo in downtown Tysons for $2,000/month or a nice townhome or home for roughly $2,500. Total cost of renting will not exceed $30,000. A $10,000 (minimum) annual savings coupled with an a 5-10 minute commute is a deal that can't be beat. After 8 years, take the nearly $100,000 you saved (after interest) and use it as a down payment on a home or during those 8 years, invest the $. Hopefully, over those 6-10 years, you will be getting promoted and advancing in your career and building up your credit score. You could make life much easier in that first decade and even sweeter after that first decade.
Look, almost anywhere else, I'd say buy buy buy. BUT, right now in Washington, D.C., I cannot stress this enough--CONSIDER RENTING!
Thanks for the info, not that I personally could ever afford an 500 grand home or ever prolly willl, but I found it interesting to read! My hubby used to live in Annapolis and wishes to this day, he stayed! his friends made a huge amount of money on their homes and now live in milllion dollar homes, oh well such is life!
Nice write-up but it's all relative...if you are earning $200k per year...why rent, when buying is just an easy option. Yes, real estate prices are pretty much equally high in all DC, NoVA, Boston, NYC, NJ, CT...
You left out the tax deductions available for mortgage interest and property taxes. Renters pay property taxes too, of course, but those taxes are passed along with the rent, so they are not deductible.
Someone taking out a $500K mortage is not buying a $500K house. Factoring in the down payment (which will probably be considerable given the income necessary to afford a $500K mortgage and the fact that this is probably a tradeup home), it's probably at least a $700K house, which would be quite nice in Vienna or Falls Church.
Someone who sits on the sidelines as a renter for eight years will miss out on substantial appreciation, and will probably not be able to afford the house that was affordable eight years ago.
Besides, not many folks want to raise a family in a condo....
Renting makes sense for a year or two while becoming familiar with a community, but the mistake most people make is not buying v. renting, but insisting on the big, new house that is located 90 minutes away from work because they can't bear to pay $600K for an older house with small closets and a non-gourmet kitchen.
but the mistake most people make is not buying v. renting, but insisting on the big, new house that is located 90 minutes away from work because they can't bear to pay $600K for an older house with small closets and a non-gourmet kitchen.
Lol true.
You're right about the tax benefit. Between property taxes and interest being deductible, my taxable income is around 25% less than it would be if I rented. It also keeps me in a lower tax bracket.
And if you think about it, now is a pretty good time to buy. We're in a slight real estate slump in NoVA and interest rates are still semi-decent.
You left out the tax deductions available for mortgage interest and property taxes.
Ditto to Claremarie's comments. Unless a person doesn't think they'll stay in the area long, I don't see why you want to rent long-term.
The other thing that perplexes me these days is folks wanting to buy "the family home" (i.e., 4-5 bedroom single family home) as their first home, even before the children arrive, even though they can't afford it. Whatever happened to buying a starter home and building equity?
VT Hookie ( or whatever you may be called in real life),
I have a slight suspicion that you may be a realtor trying to rent homes! Nobody, with a nice job, a family will rent a condo or a townhome. It is all about tax deductibles and location!
I agree with everyone else here, start small and build up over the years. Most people try to jump before they can walk, that is why we see the foreclosure signs in some neighborhoods (also predatory lending practices).
You left out the tax deductions available for mortgage interest and property taxes. Renters pay property taxes too, of course, but those taxes are passed along with the rent, so they are not deductible.
Someone taking out a $500K mortage is not buying a $500K house. Factoring in the down payment (which will probably be considerable given the income necessary to afford a $500K mortgage and the fact that this is probably a tradeup home), it's probably at least a $700K house, which would be quite nice in Vienna or Falls Church.
Someone who sits on the sidelines as a renter for eight years will miss out on substantial appreciation, and will probably not be able to afford the house that was affordable eight years ago.
Besides, not many folks want to raise a family in a condo....
Renting makes sense for a year or two while becoming familiar with a community, but the mistake most people make is not buying v. renting, but insisting on the big, new house that is located 90 minutes away from work because they can't bear to pay $600K for an older house with small closets and a non-gourmet kitchen.
Not really true in today's market. Most of metro D.C. will continue to see price declines in the near future. Sure there are a few exceptions, but even luxury/expensive homes have lost a ton the last few years. And, even when the market bottoms out most people belive that prices will remain flat for a year ro two; not appreciate. It may be three or four years before housing prices actually show positive gains.
There are many web sites that compare renting/buying housing scenarios. They do take into consideration the tax deduction allowed to home buyers. Most, if not all sites suggest that it will take four or five years for a home buyer to begin to come ahead versus the renter. If that is true, the renter could use the additional savings accrued from renting to eventually buy a house that may only be marginally more expensive than what it is worth today.
Someone who sits on the sidelines as a renter for eight years will miss out on substantial appreciation, and will probably not be able to afford the house that was affordable eight years ago.
Tell that to the people who bought at the peak in 2005 and are now underwater. Some houses in some Nova communities have "lost" half their value since 2005. So yes, a renter would have missed out on losing $200k+ over the past 3 years.
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