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I own a home. But... I do NOT think that rent is "throwing money away."
Especially not in the current RE market. Not even in my area, that is still doing fairly okay.
Rent pays for a place to live. Much in the same way that the electric bill pays for power and the cable bill pays for tv and/or internet service.
Why is rent "throwing money away?"
Unless you're being taxed excessively due to your very high income (which is not the case for most Americans) and want the write off, why on earth rush to buy in an unsure location/market?
I am a native of NC. My husband is a transplant of many years.
Both our companies are going through (again) the "we may have some layoffs" thing.
So... we are cautious about buying a larger home. We are looking, and if the right thing comes, we will buy it.
I read all the time about people desperate to grab a slice of the current market wherever they are located. If they don't have a large family that need shelter? I think they're nuts.
Why hurry? What is happening right this minute that makes people wanna buy a house?
I think the market is still sinking somewhat.
Interest rates appear to be good, but unless they're at 2%, I'm not gonna buy a house because of them.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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Currently, around here, rents are higher than ever before. Home prices are the lowest since about 2005, and interests rates are low. If one has no down payment and is not likely to stay in one place for long, renting may still be the best way to go. On the other hand, if you rent on a 5 year lease for $2,500/month (3BR 2BA House Here) after 5 years you will have absolutely nothing but your deposit back to show for spending $150,000.
In most cases that rent will increase during the period so it's even worse.
On the other hand, if you buy a similar home with enough down payment to have a similar monthly payment, after 5 years even if the home prices drop some, you will have at least the down payment back if you sell, and you will have deducted all the interest and insurance from your income taxes during that time.
Now if the tax break goes away, the housing market will go in the toilet really fast.
Save your money. There is no point in purchasing right now. You are not throwing away money when you are renting. This notion and similar comments are targeted to tug at people's emotions so they can buy.
At this point if you have a mortgage you are throwing away money on interest, tax, insurance, and maintenance.
Unemployment will continue to rise, there are plenty of foreclosures and more to come, there is way too much shadow inventory, and baby boomers need to unload their property and are the next ones to go. As a result of the mentioned interest rates will go up and prices will continue to go down. So there will be opportunities to get property at cheaper levels than we are seeing right now.
This year I have been putting people in houses that cost less than the rent they were paying. That is the case in my part of NC. If they got good credit and a steady job it makes sense to buy a home.
This year I have been putting people in houses that cost less than the rent they were paying. That is the case in my part of NC. If they got good credit and a steady job it makes sense to buy a home.
Agreed - in my market as well.
Two of my under contract listings were rentals for the past couple of years - one is in the very low $100s, the other in the very low $300s.
Savings on buying vs renting? $400 and $1000 a month.
Currently, around here, rents are higher than ever before. Home prices are the lowest since about 2005, and interests rates are low. If one has no down payment and is not likely to stay in one place for long, renting may still be the best way to go. On the other hand, if you rent on a 5 year lease for $2,500/month (3BR 2BA House Here) after 5 years you will have absolutely nothing but your deposit back to show for spending $150,000.
In most cases that rent will increase during the period so it's even worse.
On the other hand, if you buy a similar home with enough down payment to have a similar monthly payment, after 5 years even if the home prices drop some, you will have at least the down payment back if you sell, and you will have deducted all the interest and insurance from your income taxes during that time.
Now if the tax break goes away, the housing market will go in the toilet really fast.
If you can sell it.
That's where I'm coming from.
Quote:
Originally Posted by Chuckity
Agreed - in my market as well.
Two of my under contract listings were rentals for the past couple of years - one is in the very low $100s, the other in the very low $300s.
Savings on buying vs renting? $400 and $1000 a month.
But, does this make sense for someone who has to sell that same home in a few years?
That is the real issue.
And that savings is off what they WERE renting for, yes? Not what they COULD rent for?
Quote:
Originally Posted by faabala
This year I have been putting people in houses that cost less than the rent they were paying. That is the case in my part of NC. If they got good credit and a steady job it makes sense to buy a home.
Well, I'm just up the road from you in Cary.
Prices are good here... but, they could be better.
I am paying 1163 a month on a place that I bought for 182k.
I could rent it for about the same price, but I did buy in 2007, and I overpaid.
Still, if I bought it now, I could maybe pay a bit less and have a mortgage just under 1k... maybe.
That's not a big deal to me. But, I realize I'm in the minority and my mortgage is a wee fraction of our total take-home pay.
Quote:
Originally Posted by bayarea-girl
Save your money. There is no point in purchasing right now. You are not throwing away money when you are renting. This notion and similar comments are targeted to tug at people's emotions so they can buy.
At this point if you have a mortgage you are throwing away money on interest, tax, insurance, and maintenance.
Unemployment will continue to rise, there are plenty of foreclosures and more to come, there is way too much shadow inventory, and baby boomers need to unload their property and are the next ones to go. As a result of the mentioned interest rates will go up and prices will continue to go down. So there will be opportunities to get property at cheaper levels than we are seeing right now.
I think you are right. Especially in your area, and ones like it.
There is NO hurry. Unless you see your dream home for a low, low price that you can afford per month, there's no reason to jump on a house now.
Last edited by Marka; 05-18-2011 at 11:05 AM..
Reason: please, stop posting like 4 in a row, gather them all in one message
I agree with what the other posters are saying. You ARE definitely throwing money away on rent. There is no upside to it unless you know for sure that you're not staying around long. If your plans are to stay in the long run, then buying still makes more sense. At least to me.
Meh_, I can't imagine buying something now and watching the price go down. Wondering why I didn't wait to buy. When things level out it would be a better time to buy especially if your purchase is not the forever one and you can't get back what you paid for it.
But, does this make sense for someone who has to sell that same home in a few years?
That is the real issue.
And that savings is off what they WERE renting for, yes? Not what they COULD rent for?
Those amounts were a direct comparison on what each property fetched (not would fetch or could fetch - did fetch) on the rental market and what they are (not maybe could sell for) selling for.
If someone had a definite plan to move in 2-3 years, I wouldn't advise purchasing in my market. It's not something I would've advised in 1993 or 2003 - and most likely I won't be advising in 2013.
The biggest idiocy about selling the line that you're better off paying a mortgage lower than current rent, is that it conveniently shadows the transaction costs and operating costs of owning AND unloading the property. Fate which, both renters and owners alike will face when said fickle b%tch economy makes them uproot the family every 5 years. Those heel-clickers who feel their job continuity in one area is so solid, feel free to disregard the advise from the gallactically obvious.
You pay the piper on the back end, and when that roof/HVAC maintenance sets you back the equivalent of years of rent (since you ain't seeing that back and you just amortized that investment over years you probably won't be in the property to make use of said roof and HVAC until replacement) in addition to the fact the first 7 years of a 30 yr note you ARE a de facto renter (it's all interest baby), then really you're akin to the sucker who gets in over their head financing a car for 72 months just because "the monthly payment feels tenable to my stomach". Like sheep to the slaughterhouse. You ain't saving jack, Jack. When your renter neighbor pulls up that U-haul and smiles and says "SSSSSSEEE Ya!" you'd wish you'd be paying him interest to be in his position. How many suckers can swing dual house costs in this economy, even for a couple of month. Hardly anybody, bunch o' cash broke FICO addicts, barely enough on the bank for one month's worth of expenses. This is not conjecture, this is the poor cash position that DEFINES our culture of home financing. So I know I'm not speaking to the statistical outlier "home loaner".
I just unloaded my anchor house and I'm freggin glad Im back to renting. I'll buy a house, sure, when I retire in 25 years.....lol Happy renter here. Good luck!
Quote:
Originally Posted by superk
I agree with what the other posters are saying. You ARE definitely throwing money away on rent. There is no upside to it unless you know for sure that you're not staying around long. If your plans are to stay in the long run, then buying still makes more sense. At least to me.
You speak as if the majority of people fell in the category of "homesteaders". This ain't '59 anymore my friend. Mainstreet is filled with perma nomads. The majority CAN SAY FOR SURE they won't be staying in one place longer than a decade. Ergo, the home ownership competitive advantage of equity hedging is a non-starter. But the NAR won't touch that with a 10 foot pole, they;ll feed the sheep's optimism-bias.
Last edited by Marka; 05-18-2011 at 11:10 AM..
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Happy renter here. Good luck!
