If you can afford to buy a house/condo should you do it to avoid rent?

Courtesy Flush · #1 10-01-2007, 08:00 AM

I mean I'm not sure I want to commit myself to one place for the next 10 years or anything like that, but if it's smarter to buy a condo for the next 3-5 years than to rent for that whole time I'm thinking I should do it. It's just that I'm not very clear on the logistics of these things. Other than all of the maintenence I'd have to take care of myself, what downsides are there to owning vs renting?

thing85 · #2 10-01-2007, 08:05 AM

I'm in the process of trying to figure out the same thing. There are a lot of good resources out there (comparison charts, calculators and whatnot) that look at "buy vs. rent." Here's one, http://biz.yahoo.com/pfg/e10buyrent/ .

jono · #3 10-01-2007, 08:15 AM

Do a little research on the housing market?

new homes sales tumble to 7 year low

you ain't seen nothing yet

interview with housing index guru

I was too optimistic on the housing market

now it hurts

Jim cramer on housing

#1 home builder larger losses than expected

greenspan says prices to drop much further

Jimbo232 · #4 10-01-2007, 09:02 AM

CF,

The rent vs. buy decision has and always will be debated - I'm sure you can find previous threads on this topic by searching the forum.

There is not a solution that fits everyone and it ultimately comes down to the specifics of your particular situation.

The people in the homeownership crowd will tout the potential for appreciation, returns of your monthly payments through principal paydown, and the satisfaction of owning your home. The renters will reference the opportunity cost of putting a down payment into your home rather than investing it in the market, not taking on the financial risk of home ownership, the fact that you are responsible for maintenance and not a landlord, and you are not tied down to 1 location.

With a google search you can probably find some calculator or tool that can run the financials of the rent vs. buy decision, but usually the decision should be driven by your lifestyle wants/needs rather than a pure #'s analysis. I would say as a general rule-of-thumb, unless you are planning to stay in the home for 5 years or more realtor fees and closing costs will probably eat away any of the potential appreciation or principal paydown you acheive by owning a home. This would be 1 factor to consider since you mentioned a 3-5 year timeframe.

Jimbo232 · #5 10-01-2007, 09:07 AM

[ QUOTE ]
Do a little research on the housing market?

new homes sales tumble to 7 year low

you ain't seen nothing yet

interview with housing index guru

I was too optimistic on the housing market

now it hurts

Jim cramer on housing

#1 home builder larger losses than expected

greenspan says prices to drop much further

[/ QUOTE ]

Jono - are you saying this is a good time to be a buyer or to avoid the purchase of a home at this time? I think without knowing the specific market the OP is considering applying nationwide statistics is somewhat of a poor exercise. Personally, I wish I was in the market for a new home right now as the "power" has clearly shifted in the buyer's favor at this time.

spex x · #6 10-01-2007, 09:55 AM

Usually buying a house isn't worth it unless you're going to stay for at least 5 years. Whether or not you should buy a house right now is a tough call. It mostly depends on your market. In a down market that is projected to remain down for some time, it is probably NOT the time to buy for a 5 year holding period. In that market it is a great time to buy for a longer holding period though.

But many markets are appreciating normally. In a market that is still showing normal (4-7%) appreciation, buying for a 5 year holding period is probably fine.

jaydub · #7 10-01-2007, 10:13 AM

[ QUOTE ]

But many markets are appreciating normally. In a market that is still showing normal (4-7%) appreciation, buying for a 5 year holding period is probably fine.

[/ QUOTE ]

Is there any market showing 4-7% real gains on condos? Please specify such a market.

J

TheMetetron · #8 10-01-2007, 12:25 PM

7% a year isn't normal appreciation, that's exceptional returns for a house/condo. If that 7% is supposed to be real, then you are talking about the past real estate bubble and not anything sustainable.

rwesty · #9 10-01-2007, 01:47 PM

http://www.dinkytown.net/java/MortgageRentvsBuy.html

That's a good calculator.

You will have more flexibility as a renter. If you think you might need the flexibility in the near future that alone would probably be enough of a reason to not buy right now. The real estate market could do some very interesting things in the next few years but the most likely is a slight decrease or prices staying flat. Waiting to buy probably wouldn't be a bad decision.

On the other hand, if you're in a situation where you could find a property that you would like to stay in for a long period of time along with an owner who is looking to sell, a local real estate market that isn't due for a crash and access to a good deal on a mortgage it's extremely likely that buying will be the better deal in the long run.

otis_nixon · #10 10-01-2007, 02:27 PM

Depends man.

I'm living in a semi-retardedly overvalued market, it's not Orlando or anything but geez, I'm paying $1200 a month to rent a place that would go for $250k. If I got a loan to buy this place my interest payments alone would be $1700 / month for the first 5 years not to mention the cost of maintenance and taxes and insurance. So by buying I'm actually flushing away $2200 or so a month in unrecoverable costs and by renting I'm only throwing away $1200. Not bad!

Either home prices have got to come down around here or rents are going to go up, either way renting is a great deal at the moment here so I'll keep making money by doing it.

Depends where you live though.