Real estate: Buying now cheaper than rent in Tucson (Phoenix: short sales, rental)

[cheesecurd]

While the perception of homeownership has taken some lumps since the onset of the recession, a real estate website says buying is now cheaper than renting in most major U.S. cities, including Tucson. Real estate: Buying now cheaper than rent in most major cities

[Boompa]

These Articles are written by Real Estate """Proffessionals """ to rev up sales. They are pushing the 1% down or 3% down that led to many of these forclosures. I don't see Tucson as bad as the East Valley or West Valley of Phoenix.

[Bummer]

Originally Posted by cheesecurd

While the perception of homeownership has taken some lumps since the onset of the recession, a real estate website says buying is now cheaper than renting in most major U.S. cities, including Tucson.

Very interesting, Cheesecurd.

I fully agree, in spite of the current "lumps" primarily related to greed of far too many unscrupulous first person singular scammers . . . Owning is still a BETTER VALUE than Renting.

[vjsoto]

I just refinanced to 3.5% fixed rate. My mortgage is now $150/mo. less than what it was when I was renting, and that includes escrow and insurance. I would have liked to wait to get a cheaper price, but it's still worth it. If I were on the market today, I'd buy now and wouldn't wait another day.

[iflyjetzzz]

Step back and think about this for a while. If buying was truly cheaper than renting, large companies would step in, buy up a ton of houses and then rent them out for a profit. That's not happening because 1) home prices continue to decline and 2) there is more to the cost of home ownership than simply paying the mortgage.

My favorite unbiased website from a Tucson realtor shows home prices dropping off a cliff in August. The final numbers aren't in but it's not looking pretty:
Only Reporting on the 9 Tucson areas, not the 13 Areas covered by TAR MLS Statistics Report
August 2011

Last Updated On: Aug, 30
842 Closed Transactions
100 Short Sales
366 REO Sales
$156,420 Average Sale Price
$120,500 Median Sale Price
July 2011
Last Updated On: Aug, 14
1021 Closed Transactions
105 Short Sales
451 REO Sales
$178,127 Average Sale Price
$128,000 Median Sale Price
June 2011
Last Updated On: July, 12
1186 Closed Transactions
100 Short Sales
513 REO Sales
$169,265 Average Sale Price
$126,296 Median Sale Price

Ignore July numbers; that looks like a dead cat bounce. And wait until mid-Sep to get a better read on Aug's numbers. A few high dollar sales could take the numbers back up to merely a modest decline.
The source website: Tucson Real Estate


I'm quoting a portion of the original poster's article:

In July 2011, the area's median sale price was $125,000, a 17 percent drop compared with July 2010, numbers from the Tucson Association of Realtors Multiple Listing Service show.
July also was the third straight month to show a decrease in median sale price. In April, the median sale price was $132,000.

Articles such as this do not bother to factor in home value declines. A $7000 loss over three months is staggering; that's $2333 per month in home value decline. On a property where the PITI is less than $1000/month.
Note the 17 percent annual decline. That means if you bought back in July 2010 with a 20 percent down payment, your remaining equity is 3 percent. 3 percent doesn't even cover realtor fees when you sell the house. And you still paid a mortgage every month along with taxes and home repairs.

Rather than stating that mortgages are cheaper than rent, a better way to frame this is that currently home prices are falling much faster than falling rental prices. Rental will continue to fall and will eventually be lower than mortgages; mortgages cannot remain less than rent in the long term.


My apologies for being such a negative Nelly but we need to discuss the subject honestly without emotion, putting pencil to paper.

[rbwpi]

Originally Posted by iflyjetzzz

Articles such as this do not bother to factor in home value declines. A $7000 loss over three months is staggering; that's $2333 per month in home value decline. On a property where the PITI is less than $1000/month.
Note the 17 percent annual decline. That means if you bought back in July 2010 with a 20 percent down payment, your remaining equity is 3 percent. 3 percent doesn't even cover realtor fees when you sell the house. And you still paid a mortgage every month along with taxes and home repairs.d to discuss the subject honestly without emotion, putting pencil to paper.

Excellent point. Comparisons which state that monthly payments (PITI) are less than rent fail to take into account the potential cost of loss of equity relative to ownership. This loss of equity due to potential price declines is far from a stretch, but a reasonable assumption based upon current trends and economic conditions.

[cheesecurd]

All I know is we bought a move in condition home last month for $179,000 with 85% cash down, and the monthly expenses on our mortgage, insurance and HOA fees is $375.42. Where in tucson can you rent a 2000 square foot home in a wonderful neighborhood (Oro Valley) for $375.42 a month?. We intend to live in this home for 10-20 years I bet in the end we come out at least even money.

[iflyjetzzz]

Originally Posted by cheesecurd

All I know is we bought a move in condition home last month for $179,000 with 85% cash down, and the monthly expenses on our mortgage, insurance and HOA fees is $375.42. Where in tucson can you rent a 2000 square foot home in a wonderful neighborhood (Oro Valley) for $375.42 a month?. We intend to live in this home for 10-20 years I bet in the end we come out at least even money.

I've got to ask. Would you please list by item all of your closing expenses? If you're going to put 85% down, you might as well have gone all the way with paying cash. There were a lot of mortgage origination fees that you paid; if you paid the entire house cash, there would have been no mortgage origination fees.

[Jalhop]

Originally Posted by cheesecurd

All I know is we bought a move in condition home last month for $179,000 with 85% cash down, and the monthly expenses on our mortgage, insurance and HOA fees is $375.42. Where in tucson can you rent a 2000 square foot home in a wonderful neighborhood (Oro Valley) for $375.42 a month?.

That's an apples-to-oranges comparison. The best way to compare renting to buying I've seen is the NY Times rent vs. buy calculator (googleable). You have to guess at future trends, of course. Assuming one can readily rent the house to a decent tenant (even if you intend to occupy it yourself) and prices have flattened, Tucson seems a good deal for buying now. In general, you want to buy when you can do it for less than 150 times monthly rent. If you could rent your place for $1200/mo. you've removed a lot of risk.

[Jalhop]

Originally Posted by iflyjetzzz

Step back and think about this for a while. If buying was truly cheaper than renting, large companies would step in, buy up a ton of houses and then rent them out for a profit.

Renting out houses entails risks that owner-occupieds don't take. Namely, the risks that the place will be trashed (possibly destroyed by meth) or that the tenant will leverage the law to stay rent-free. Buying can certainly be cheaper than renting for owner-occupieds, even as large companies remain on the sidelines.