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Old 07-28-2011, 12:52 PM
 
867 posts, read 2,507,837 times
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After posting the other day that I was happy to keep renting, even with a rent increase coming ($100/mo), I noticed that home prices in the association where I live had dropped significantly in the last year.

The reason: there are 4 short sales and 1 foreclosure and NO straight sales in the neighborhood. Prices range from $99,000 - 106,000 for the same style unit I'm currently in (2 bed/1ba) which my landlord purchased for $167,000 in 2006. There are also 2 larger units (3bed/2ba) for $119,000--which were selling for $250,000 at the height of the bubble. These are coach homes or "quads." I'm in a residential area surrounded by single family homes and backed by a community college. The adjacent neighborhoods have only seen modest depreciation in the last 4 years.

I think this may present a unique opportunity for me and could end up costing less than my rent or within a $200 of it. But I want to be smart about this too. What calculators have you found to be the most thorough and making the best assumptions?

Thanks
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Old 07-28-2011, 01:29 PM
 
Location: Newton, MA
324 posts, read 850,903 times
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I like this one:
Is It Better to Buy or Rent? - Interactive Graphic - NYTimes.com

But as with any calculator, the unknowns are the biggest factor: where will housing prices be in the coming years? Small changes in that factor make huge changes in the rent vs buy calculation.
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Old 07-28-2011, 01:38 PM
 
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Thanks, I was playing with that one earlier.
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Old 07-28-2011, 03:29 PM
 
575 posts, read 809,576 times
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Quote:
Originally Posted by NotAPrincess View Post
I like this one:
Is It Better to Buy or Rent? - Interactive Graphic - NYTimes.com

But as with any calculator, the unknowns are the biggest factor: where will housing prices be in the coming years? Small changes in that factor make huge changes in the rent vs buy calculation.
Agreed, what will happen to rents and what will happen to housing prices are the big unknowns in any rent vs. buy calculation. There was a great article on NPR about the Freddie Mac rent vs. buy calculator not allowing for the possibility of home prices decreasing.

The Friday Podcast: Finally, An Apology : Planet Money : NPR

I would play around with the NY times calculator and assume some housing depreciation and see what it comes out to if you keep rents steady (considering yours just increased). If values already dropped 50% your future drops may not be as significant.

I'm certainly a housing bear, especially in the market I'm in because rents are significantly cheaper than an equivalent home/condo. But it sounds like your area may have adjusted to where it makes sense to buy, even if you mention that surrounding neighborhoods haven't fallen that much. What is your price to rent ratio (total house price vs. one year of rent)? What were the places you are looking at selling for in 1998-1999 pre-bubble? You could also compare median incomes in your area to median housing prices.

Good call on checking whether it's better to rent or buy, most people just assume it's better to buy no matter what.
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Old 07-28-2011, 03:37 PM
 
Location: Just south of Denver since 1989
10,419 posts, read 27,070,552 times
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go to the mortgage sub forum, open a post - there's a list of calculators to chose from
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Old 07-28-2011, 04:31 PM
 
Location: Atlanta, GA
105 posts, read 240,607 times
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I've used a variety of them but also noticed if you want really detailed information, this one is pretty good. Keep in mind, the information is only as accurate as the information going in. Can't predict the future.

http://michaelbluejay.com/house/rent...tml#taxschemes
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Old 07-28-2011, 04:46 PM
 
Location: Cary, NC
28,388 posts, read 50,478,608 times
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Quote:
Originally Posted by baruchel23 View Post
I've used a variety of them but also noticed if you want really detailed information, this one is pretty good. Keep in mind, the information is only as accurate as the information going in. Can't predict the future.

http://michaelbluejay.com/house/rent...tml#taxschemes
From "A side note about the unfairness of tax breaks:" on down, he reveals assumptions based on totally political BS.

No credibility.

Better to go with the NY Times calculator than that site.
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Old 07-28-2011, 06:10 PM
 
575 posts, read 809,576 times
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Quote:
Originally Posted by MikeJaquish View Post
From "A side note about the unfairness of tax breaks:" on down, he reveals assumptions based on totally political BS.

No credibility.

Better to go with the NY Times calculator than that site.
You made it sound like he factored his opinion on the mortgage interest deduction into the rent vs. buy calculator. I donít see how his opinion on the HMID would affect the actual calculation, although it might be worth factoring in what would happen if the HMID were eliminated. That option has been politically thrown around in discussions about the debt/deficit.

Itís definitely worth considering the tax implications of a home purchase and it makes sense to be realistic about it. Everyone hears about the great deduction you get from owning a home, but if you donít run the numbers beforehand you might not know how much of an impact it will have on your individual situation. A lot of people might be surprised that their interest deduction + other deductions doesnít exceed the standard deduction.

Iím also unclear why what he writes afterward is pure ďpolitical BSĒ. The interest deduction does favor higher priced homes because the owners will pay more interest. The interest deduction does favor homeowners over renters.
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Old 07-28-2011, 06:31 PM
 
631 posts, read 1,288,853 times
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Quote:
Originally Posted by msdmoney View Post
What is your price to rent ratio (total house price vs. one year of rent)?
just curious: what is considered good number for that ratio, in your opinion?
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Old 07-28-2011, 07:04 PM
 
867 posts, read 2,507,837 times
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Quote:
Originally Posted by msdmoney View Post
It’s definitely worth considering the tax implications of a home purchase and it makes sense to be realistic about it. Everyone hears about the great deduction you get from owning a home, but if you don’t run the numbers beforehand you might not know how much of an impact it will have on your individual situation. A lot of people might be surprised that their interest deduction + other deductions doesn’t exceed the standard deduction.
Not only that, BUT, you also have to consider it in light of ALL your deductions. I donate 10% of my income and that already has a big impact on my refund. I also work in IT and work on a project basis, not permanent. Now, if I have a good year, with steady, high-paying contracts, the more deductions the merrier. But if I have a very lean year and collect unemployment (which I usually don't do withholding on), I can max out my deductions and not see the full benefit of the tax break.

When I owned my condo I found that my tax benefit was about 14% of my interest and pt. Not as much as most marketing materials had suggested it would be.
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