Profile picture for susan318

Is it wiser to buy a home or rent

I'm renting right now but I'm not sure its the right time to buy, with the economy and I'm not sure where to move to.
  • October 13 2011 - US
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Be a Good Neighbor. Be respectful and on-topic. No spam or self-promotion! See our Good Neighbor Policy.

 
 

Answers (31)

Dan
I thought of two out of three of those things. Being an actual country hick, the rent control issue is way out of my wheel house, but represents an example of an inefficient or subsidized market. One which a willing renter could take advantage of and benefit from. And, by the way, I was complimenting you as one of the maybe 8 or 10% of renters who actually bother to consider whether or not they could actually benefit by renting. The other 92% being made up of people who don't want to own, have a known short time frame that eliminates ownership, have issues that keep them from being buyers (though they wish they could own), etc...

What I mean is, that renters, in general, don't analyze their housing decision any better than Buyers led by cheerleaders do. And, the question, as asked, can't be answered, except to say that more than likely you could find a house "worth renting" and "worth buying" in most any market in the US. The 6 or 8 severely crippled markets that have issues like rent control, and people who've lost 50% of their value, will be poor examples to use in answering this, or any other question, unless we know the questioner lives in one of those markets.
  • October 17 2011
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Profile picture for the_country_hick
Hamp, "In my humble opinion, if you live in a home, in return for cash, you are buying it for somebody."

Did you ever consider that rent control can make a rental far cheaper than buying would cost?

Did you ever think the landlord bought the house 25 years ago so they have a very small payment each month to cover?

Did you ever think that a landlord is reluctant but could not sell the house so they PAY $2,500 a month for their mortgage but can only get $1,200 a month for rent?

There are many instances where rent is below today's purchase price but below what the present owner has to pay on that property.

Many landlords have been and are paying extra each month as their renters do not pay enough to cover all of the houses expenses.

In my state we have (or had) one of the nations highest rates of house ownership. We also had the distinction of being the state that the vast majority of home owners could not have afforded to buy their house at present vales (as of a year or 3 ago).

That only goes to show someone who has a house may not have the mortgage a new buyer would have on it or need to make a ton of cash to pay a mortgage they could not afford to get at today's values by rental income alone.

Get a new catchphrase. That one is broken.
  • October 17 2011
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Pasadenan, if you'd like, I will place an italic "j", in parenthesis, after each statement I make that is intended to be facetious.

And, I too agree with your assessment of Rob's market and opportunities there versus elsewhere.

To turn this back towards the Op's question, I think it is wiser to be on which ever side of the market, buying or renting, that you can best take advantage of the market's inefficiency. In a perfectly efficient market wouldn't the buy vs rent analysis always be a push?

I would argue further, that there are far more people who would be considered wise, that have bought RE at every opportunity they found reasonable to do so, than there are people who have never bought any RE. Even if you include the last decade of Caligula like RE circus that we have been forced to observe, and the existence of the somewhat rare "Dan the Hick" types.

In my humble opinion, if you live in a home, in return for cash, you are buying it for somebody. The question is; are you buying it for yourself or for CJ Lavan? It is sort of like saying the Buyer pays the RE commission. The tenant pays the costs of owning, plus some, unless they find an inefficient landlord.
  • October 17 2011
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Profile picture for blue screen exile
I can't imagine any reason that would would consider doing something just because someone else is doing it.

Besides, AzRob's market area is substantially different than most of the nation.

Even in college communities, I'm not seeing the kind of investment properties and such low prices as he mentions.
  • October 17 2011
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Profile picture for sunnyview
lol I like the AzRob slogan, I think you should send it to the NAR right away.

There is a good rent vs buy calculator from the NY Times that might help people run numbers in their own market.
  • October 17 2011
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I read it and understood it. I was just trying, for the benefit of the thinking members of the audience, to highlight the extremity of the numbers chosen.

If I were in charge of the NAR I might change the cheer to something like this; "AZRob is buying! Shouldn't you?"
  • October 17 2011
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It's going to depend on your local real estate market and how much it's going to cost you to rent versus buy.  Calculate if it's better to buy or rent with the [Hotlink to agent site removed by Zillow moderator. Please consult our Good Neighbor Policy for more information.]
  • October 17 2011
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Profile picture for sunnyview
It has been a while since I saw so many agent buy now platitudes on one thread. Feels like the old days pre bubble pop.

After seeing their friends and neighbors crushed by underwater houses, I just hope that buyers are smart enough now to do their own research and not listen to self serving recommendations.
  • October 16 2011
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Profile picture for the_country_hick
Bob, At the end of my scenario below I stated "Sometimes giving money away costs less than buying something for a stated times frame and purpose. The complete numbers show the truth not just one half of the equation."

The complete numbers was key.

You gave nothing to compare buying to renting costs. In some areas rents are very small compared to buying costs. I have no idea what a house would sell for in your area.

You also did not give interest rates. Someone with worse credit will pay a higher rate than someone with better credit.

You also did not factor in maintenance costs or realtor fees when selling if applicable. Maintenance is a guaranteed cost you will face. How long would it take to break even assuming constant house prices and average selling costs including expected maintenance costs?

I figured that $4,200 a month buying was high. You gave nothing to give a better monthly payment so it was fair to include any price as a comparison.

Next time give a complete scenario with facts to show why one way could be a smarter idea. Even then renting to feel safe could be the best solution at least for a time.
  • October 15 2011
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Bob:

You are using what in logic is called a false choice fallacy.
Options: A. rent for 60 years. B. buy today.

There is a choice C: measure the buy/rent ratio, the foreclosure rate in your town, the local economy, the supply and demand in your area, and wait to buy if these factors are against you.

For some reference points. 
New York times rent vs buy 
When to Buy for people that can think (me years ago on zillow)
  • October 15 2011
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Some of you have apparently misread my posting or read more into it than I suggested....

Here is what I said:
If you decide to rent your whole life(lets say for 60 years) and the rent was a consistent $1200, that adds up to giving landlords $864,000. If you buy a modest home and get a 15 year mortgage on it, you can be done paying(except for taxes and maintenance) in 15 years and never pay again.

I do not know how someone thought there was a $4200 payment involved or how it became a million dollar home rental.
In my area outside of Chicago, you can rent a modest duplex for $1200 per month. Or you can buy a modest duplex for $110,000 cash or make payments of about $1200 a month PITI on a 15 year mortgage at 4% allowing for $813 P&I and $387 for tax and insurance.
Sure there are variables like rents going up and down and taxes going up and down and maybe not staying in the home as long as you thought you would. You can then rent it out and have the tenant pay you.
At some point it is nice to live in a paid off home and the sooner a person starts the sooner it gets paid off.
  • October 15 2011
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Robert, I see you're new.  Please read the spiel that is pretty obviously printed underneath the reply box which makes it clear that spam and self-promotion is not welcome here.

It also helps to read the posts prior to yours.  If you had, I can guarantee you wouldn't have posted what you did.

And about these numbers being bandied about, I'm confused-  how could you possibly pay $1200 in rent for something that would be worth a $4200 mortgage.  Am I missing something??

Its up to people to do the work necessary to determine which option is best for them.  It can't possibly be answered accurately by anyone on these boards.  We're strangers who have no idea about the specifics of your life.  How could we possibly know what will work best for you?
  • October 15 2011
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Hi Susan,
I bet you did not think your question would generate so much "talking."  Guess that shows it's a great question.  I wish you the best in evaluating your particular situation and making a decision that is best for you.
  • October 15 2011
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Robert: Interest rates where at historic lows 2 years ago. How did buying then work out? Since you are too lazy to actually read the discussions here, before posting this dribble, I doubt you'll have an interesting reply...
  • October 15 2011
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Interest rates are at a historic low. Buy now!

Robert Tyler
Diamonds Real Estate, Inc.
[contact information deleted by Zillow moderator.  Please refer to our Good Neighbor Policy for posting guidelines.]
  • October 15 2011
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Profile picture for SteadyState
Richard and Hamp -

Either you did not read Dan's post or you did not understand his post. The point is it has to be a comparable and complete financial analysis. If your mortgage is $4200 for home that you can rent for $1200 you will not come out ahead if you buy instead of rent. Bob's number appear cooked since we are using 60 years of residence - the average home sells every 11.6 years. For first time home owners this number is below 5!
So lets do the numbers.
If you live in the home Bob want to sell you for 5 years:
Cost of Renting: 12 * 5 * $1.2K = $72K
Cost of Buying: 12 * 5 * $4.2K = $252K
You loose: $180K in 5 years!!!

If you live in the home Bob want to sell you for 11.6 years:
Cost of Renting: 12 * 11.6 * $1.2K = $167K
Cost of Buying: 12 * 11.6 * $4.2K = $584K
You loose: $418K in 11.9 years!!!

If you live in the home Bob want to sell you for 30 years:
Cost of Renting: 12 * 30 * $1.2K = $452K
Cost of Buying: 12 * 15 * $4.2K = $756K
You loose: $324K in 30 years!!!

If you keep living longer in the home Bob wants to sell you, you will reach a number of years where you roughly break even - that number is ~58!
Cost of Renting: 12 * 58* $1.2K = $835K
Cost of Buying: 12 * 15 * $4.2K = $756K
Cost of Selling home = 10% of $756K = ~$75K.
You make: $3K in 58 years!!! What an investment!!!

(Now I know this analysis is incomplete - but that is the point - some REAs use  incomplete numbers to mislead people into coming to inaccurate conclusions - hence the number 60 years. If you live in the home for 60 years you will make a hypothetical profit - no mention of the cost of the home now, the mortgage interest, insurance, etc. - but just enough information so one can make a plausible (but inaccurate and incomplete) case for buying a home. Shame. Shame...)


  • October 15 2011
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I wouldn't mind renting a place for $1,200 a month either. You can be my realtor. Is it a nice apartment and a easy commute to my work?
  • October 14 2011
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Dan, I need to know where I can rent a million dollar home for $1,200 a month.
  • October 14 2011
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I would never encouraage anyone to buy a house if they are not financially or emotionally ready. The decision to buy depends on so many factors that are so different for each individual. I own investment properties amd rent them out for a profit. I also reside in a rental that is a direct waterfront property at what I feel is a great price. I rather spend a million on investment properties that yield a higher return on my dollar then buy a house in the community of my choice that will not give me the same return. My wife enjoys where we live but with a small child she would like to find a home in a particular community and settle down. It's not a question of right or wrong but a question of preference. I wouldn't mind to continue spending my dollar on rental properties that yield the most return but a happy wife is a happy life. I'm at a stage in my life where my preferences are changing. Interest rates are at record lows, you get to deduct your interest from your income, and you don't have to move if the lanlord decides to sell or wants to raise the rent. Everything has a value and that value is different for each individual.

  • October 14 2011
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Greg: thank you! I have sadly reached the conclusion that most real estate sales agents are just too stupid to even understand the point, but you have given me at least one other example of an agent who understands comparing rent to buy... That one simple idea is making me very close to a millionaire now...
  • October 14 2011
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Whether renting is better than buying depends on many factors, particularly how fast prices and rents rise and how long you stay in your home.  You can compare the costs of buying and renting a home using the calculator at this website link: http://www.nytimes.com/interactive/business/buy-rent-calculator.html
  • October 14 2011
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Profile picture for the_country_hick
Bob, "If you decide to rent your whole life(lets say for 60 years) and the rent was a consistent $1200, that adds up to giving landlords $864,000."

If you buy a house for 15 years at $4,200 a month instead how much money have you saved by renting?

$3,000 x 12 months x 15 years renting = $540,000.

Rent at $1,200 a month x 12 months x 15 years = $216,000.

I could probably buy a house with the money I saved by renting when the 15 years was up. At a minimum I have 45 more years to spend an additional $324,000 to break even by not buying a house.n with buying. That does not include any maintenance costs that will happen or interest I will make on my money saved by not buying a house.

Sometimes giving money away costs less than buying something for a stated times frame and purpose. The complete numbers show the truth not just one half of the equation.
  • October 14 2011
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If you decide to rent your whole life(lets say for 60 years) and the rent was a consistent $1200, that adds up to giving landlords $864,000. If you buy a modest home and get a 15 year mortgage on it, you can be done paying(except for taxes and maintenance) in 15 years and never pay again.
  • October 14 2011
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Profile picture for CJ Levan
I love this question ... I am a landlord and believe that anyone who rents is throwing money away.  So I allow them to throw their money my way.  Every property I rent, the tenants are paying all the bills, principal, interest, taxes, insurance, utilities and maintence ... they just call it "rent" but when they pay me their rent it all gets divided into the above listed categories ... and then of course there is my additional category of profit.  Thank you tenants keep renting and I will keep buying.
  • October 14 2011
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Profile picture for blue screen exile
I'm baffled why Realtors® have been brainwashed to believe that home ownership is "the" American dream, let alone an American dream...

The only ones that "dream" about owning a home are Realtors® and the people that shouldn't be buying a house because they cannot afford it.

The people that "want" a house simply "buy" it instead of dreaming about it.

Actually, I think the real American dreams are:
1) Financial independence
2) Ability to make a positive contribution to others... sense of "purpose".
3) Health and mobility; to be where one wants, when one wants
4) Positive relationships.

Then there are some of the more outlandish American Dreams, such as to sell 10 million copies of a recording... or to go to the moon..., or to run a mile in 2 minutes...

One of the highly prized "ideals" in our nation is "freedom".  One doesn't have "freedom" if they choose to become a slave to a house and to a mortgage payment.

On the other hand, a renter is free to leave with very short notice... and someone living under a freeway bridge is free to move at a moments notice.  (But the person living under a freeway bridge is not "free" to take a shower when they please, so there are obvious trade offs).

If one is not planning on staying in the same place for at least 10 years, one likely is better off renting.

Disclaimer; I bought; I own,  I have no debt, and I've stayed substantially more than 10 years.  And I would buy again if the price was right, but not due to any imaginary "dream" that some Realtor® tries to impose upon the world.

And yes, there are at least 5 million home owners each year that "dream" they can "dump" the shackles of that burdensome house that no one seems to want nor appreciate.
  • October 14 2011
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Jon, you might try reading the post below yours. Note how ironic yours now looks? 

Susan: here is a post I wrote on zillow years ago, about when to buy. Incidentally the same logic caused me to sell my homes in 2005... Now I'm on my way to buying my 8th in the past year: 

link: when to buy for people who can think 
  • October 13 2011
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Profile picture for cbsirealty
I still the the American Dream is home ownership. Even though we are in a bad economic time, real estate is still the best investment. Now is a great time to buy. Mortgage rates are around 4% which are historical lows, there is a ton of inventory from which to choose and prices are down. Yes you can sit on the side line like many thinking the prices may come down even more, but if you plan on staying in the home for a while I think you would be making a great decision to buy now. The market will not be down for ever, it will come back and I have a feeling a lot of people will regret not buying now. The rule is to buy when nobody else is!!!! Good luck .
I sell real estate in Staten Island , Ny. Great place to live!
  • October 13 2011
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Profile picture for wetdawgs
This is a decision that only you can make, but be aware that it is a very rare agent who will not say "now is a good time to buy".  (I am not an agent).

Here are some links to Zillow guides - but read those with caution also.  Equity?  Ask people who've bought in the last 5 to 10 years about their equity.  They'll answer "Ha!  What equity?" (or more likely words the moderator would delete).   Tax deductions?  That is only if you can itemize so most home owners do not get a tax deduction.

Owning vs renting. (Zillow guide).

Heck, here is the link to the guides.

Would you ask a car salesman if it is a good time to buy a car?  An encyclopedia salesman if it is a good time to buy an encyclopedia? 

If you buy and change your mind because you decide you don't like the neighborhood, or have a job relocation, or have to take in your brother's 10 kids - remember it will cost you 6 to 10% of the market value of the house to sell.

Disclaimer - I am a home owner, but approached it cautiously and am glad we did.

 




  • October 13 2011
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Profile picture for the_country_hick
As a general rule I would say to rent. But your particular situation and area might have a different answer.

This shows you how to look at the financial part and decide if buying or renting makes the most economic sense for you.
"Does it make more sense to buy, or to rent? Here is the way to find out for sure."

This gives some not so obvious reasons why renting could be the better option.
"Why rent if you could buy for less money? Valid reasons inside."

Low interest rates only cause house prices to be higher than they should be.
"Do low interest rates really make it a good time to buy a house?"

We had a housing bubble. This shows what the bubble looked like and how bubbles for and die.
Do you know what the housing bubble really looks like? ... - Zillow Real Estate Advice

Even the Federal Reserve says house prices are to high and must fall more.
The Fallacy of a Pain-Free Path to a Healthy Housing Market - Economic Letter, December 2010 - FRB Dallas

Others also think prices must fall.
Peter Schiff: Here's Why Home Prices Have To Decline At Least 20% And Probably More

Shiller: Housing Could Fall Another 25% But Is Harder to Predict Than the Weather - Yahoo! Finance

This shows some real data about why buying might not be a good idea now.
10 Key Charts to See Before You Buy or Sell Your Home « Real Estate Prices & Mortgages on HousingStory.net

Cheapest Homes in 40 Years? Not Even Close… | The Big Picture

Before buying anything that is a big expense be it a car, big screen tv, or house be sure you feel safe and secure in your job and life situation. If you do not feel comfortable that your job will exist in 5 years probably renting is best.

If you feel safe and secure in your job then make the best economic choice for you.

Do not forget that if renting is a lot cheaper than buying it makes the most sense. If buying is a lot cheaper it could be the right choice depending on your long term goals. It takes about 7 years on a 30 year mortgage to break even with house prices that do not change for amortization and realtor fees to be paid for. That assumes no maintenance costs come up.
  • October 13 2011
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Profile picture for SteadyState
Susan -

Since Beth is encouraging you to buy let's see how her area did recently:

The median priced home in Knoxville currently costs $130K
Median household income is $30K
Median price $130K = 4.33 * median household income
In order for homes to be affordable: price < 3 * household income
(This suggests that the market will go down further)
Now let's see some recent stats from the area:

Year to Year - Down 5.1%
Quarter to Quarter: down 0.1%
Month to month: down 0.2%

Despite what Beth says - there is risk in buying. Beth is simply vomiting the typical NAR propaganda - interest rates are low, home prices are low  - it's a great time to buy. They have been saying this since 2007 without merit)
(Since she says this is the best time to buy ask her if she will guarantee that you will not loose money in your home if you sell in 7 years - guarantee means that she pays for your losses should they occur in any year after the seventh year you purchased the home - she can put her commission in escrow till your situation becomes clear when you sell.)

  • October 13 2011
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