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The benefit of owning a home is that your mortgage will stay flat while your rent will constantly go up. It won't benefit you as much now, but sometimes it's not all about immediate gratification.
I was on the fence just like the OP a couple of years ago. Without question, for me, I'm very glad I made the plunge to become a homebuyer although it was daunting at first.
+ Owning your own property with no annoying landlord telling you what you can't do.
+ Not hearing the tenants above you
+ Having a backyard
+ Entertaining Guests/Company
+ Summer BBQ's
+ My previous 2 bedroom apt rent approaches my mortgage payement (via rent increase) every year. At some point in the next decade it will surpass the monthly mortgage payment.
+ I can sell my house and get some return on investment in the future.
+ Don't want to smell OPC (Other People's Cooking) or worse
I'm 29, and eight months into a 30-year mortgage on a 400k house in a great neighborhood with a little less of a tax burden than what you state above. It's been great so far and I don't regret it for a second.
The way I looked at it back when I was younger, was this -- I was born on Long Island, which means that if I'm going to stay close to family and friends, there are some sacrifices to be made. Oh well, I dealt with it. I got over the ridiculous generalization that living with your parents after college meant you were a lazy bum (and/or that your parents were enablers) b/c I knew that this one of the sacrifices that needed to be made. My wife did the same -- and once we were engaged in 2009, we were in line to have close to $80k in savings for a possible house purchase.
My wife and I make a combined salary that is in line or very slightly above the median income for the area. Contrary to popular myths, we have enough to eat hot, tasty meals; meet with friends on weekends; go out to restaurants on a reasonable basis; spend on our hobbies; go away overnight/for a weekend; etc. Even after paying our bills. Of course, all this is possible provided you can practice moderation. If you're the type that purchases every single thing that you see and desire, then maybe house ownership isn't for you at the present time.
I have no issues with those who are more comfortable renting or do not see the benefits of owning a house. It is a perfectly understandable position. I considered moving out when I was a year or two out of college, but ultimately I decided against it. And I also understand that not everybody has the opportunity to spend a few years living with their parents and building a nice savings. I was lucky in that regard, I admit. But you also have to be willing to take advantage of that opportunity when you have it, and not let it go by the wayside because you're afraid of being judged by people who probably aren't all that important in your life anyway.
I just think that if you have ties to Long Island, and you want to stay on Long Island, you have to come to grips with the fact that there are financial restrictions here that require some sacrifice. Just like if you're goal is to live somewhere for the lowest price, you'll need to move elsewhere and sacrifice your ties to Long Island. That's just the way it is. Almost every single person that I grew up with and remain close with has recognized these realities, and has chosen to either remain on Long Island or test the waters for a few years in NYC or Queens before returning, despite the popular belief that every 20-something leaves LI in the dust as quickly as possible. Some rent, some own homes.
You don't mention if you have children. How will this change if and when you do decide to have them?
This is not a knock mind you, just wondering if that day comes, will you need both incomes to survive, will the cost child care push you over the edge (unless a relative is involved), will one of you want to say home and raise would-be children? Again, just wondering when does sacrafice become burden?
My husband and I both grew up on LI and raised our children there. Great schools and a wonderful place to live back in the day. Over crowding and taxes have pretty much ruined it and unless you are financially successful, it's really tough to afford anything decent. If you don't have a great job with a promising future, maybe it's time to think outside the box or island in this case. We sold our home in 2006 for a lot of money and now have a B&B upstate, just two hours north of NYC in the beautiful Hudson Valley that we love. Last year we invested in a river front condo in Fort Myers, FL with a million dollar water view for less then $100,000 and we can walk to a pretty happening revitalized downtown. My point is, there is life after LI and there are a lot of cool, beautiful and affordable places to live. None of our children stayed on LI. One son is in Seattle, a daughter in KC, another in Fort Lauderdale and a son in Brooklyn. We do miss friends and family sometimes, but with MacArthur Airport, going back for a visit is always easy enough.
The stock market is a fluid market with ease of entering and selling. A home is an illiquid investment which takes on average 30-60 days or longer to consumate a purchase or selling transaction. There are high costs involved in homes, whereas the costs to enter/exit a stock transaction are far less depending on volumes could cost 20 bps versus 5-10% on home purchase/selling prices and involve far more intermediaries - bank, purchasing attorney, sellers attorney, real estate appraiser, two sets of real estate brokers, state taxes for the seller, funding of transactions, etc.
If homes could be flipped the way stock could, then you'd either have an immediate drastic decline of home prices or on the way up, a skyrocketing price - the way it stands now, there is a more orderly move either up or down.
Yes, and a vastly different return over time. The housing market in the United States has returned 4% annually since the end of WWII while the stock market has returned 12% annually in the same period of time.
Yes, and a vastly different return over time. The housing market in the United States has returned 4% annually since the end of WWII while the stock market has returned 12% annually in the same period of time.
national averages don't tell teh story in the NY metro area.
assuming we have that info for Long island, we should be looking at the rental costs now vs then.
I'm going to get jumped on for saying this, but in a market where real estate consistantly goes up, you will always in the long run, end up ahead buying. NY area is that kind of area.
I am pretty sure that by the time I pay off my mortgage, my house is going to be worth significantly more than I paid for it. I'm also as reasonably sure that in rents will exceed my mortgage payment in the long run.
the other factor I don't think was brought up in this thread is, most rentals on LI suck. Nice things aren't for rent on LI and apples for apples rent vs buy prices aren't all that different here. if you want to rent a nice sized house you're in the 2500-3000 range, maybe slightly cheaper than buying, but you don't get the write off which is offset by maintance.
Either or, its certianly not up to me to convince anyone to buy a house, I am not a RE agent.
in my head, it would be nice if RE doesn't lose value over the next handful of years, as I don't want to see my home being worth less than I put into it, but barring a crazy off the cliff drop, I'm not really concerned with the fluctuations.
"Even a house that lost value would still provide enough capital to purchase another property. You can't do that if you are renting."
Not totally true. If you are underwater on your house, or you have not been in the house that long (less than 5 years, say) if you go and sell that house, you will still have to pay off the rest of the mortgage to the bank with whatever profit you make....
That won't leave a lot left over to put down on another house.
Not to mention the first 5-7 years of paying off a house is mostly interest anyway, if you crunch the numbers.....you really do not start paying principle until about 10 years in, that is if you did not put down a huge down payment and just did the 10% minimum.
In addition, I feel that renting is more liquid, allows you more flexibility and freedom to come and go as you please and to move when you need to.
Unless you are say 40 or older and you have been in your house a long time like my parents, that is different.
However, you do not know what life will bring all the time. For example, say you get a great job offer out of state you can't refuse and you need to re-locate? But you have a house.....will be very tough to go...
Say you meet a nice significant other, but its a long distance relationship (such as they live in the city or upstate somewhere) and you eventually need to move or re-locate to be with them.....have a house? It will be very hard to just pick up and move....
These are just some scenarios where it shows how illiquid and how inflexible owning a house can be, and how cumbersome and time consuming it can be to sell it.
Unless you are planning on staying in the same area or the same house for 20 years or more, then it may make sense. But other than that, I feel the flexibility of renting makes more sense, depending on the situation.
Another reason for owning is saying you were foreclosed on sounds much more trendy than saying your broke @55 was evicted.
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