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WHY RENT when you can BUY ?

Deciding to own a home is a big decision. Here are some facts that may help you take the first step towards becoming a homeowner. Renting the same property for seven years that you would buy (if rent was between $500 & $610) over a period of 7 years.  The total rent you would pay would be $46,420.00.  Unfortunately, none of that would be returned to you through savings or as an investment.  In the Russellville, AR area...home values on average rise an average of 2.5% per year since 1985. Assuming this continues, a home you could have purchased for $100,000, and financed at $102,000...in 7 years (on Average) could rise to a seven year equity growth of $15,969.00.  It gets even better.  The savings of rent vs. ownership, plus equity growth for appreciation, and the principal reduction on a loan could all add up to a total benefit of $31,214.00 after a seven year period.  So...why rent?
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July 22 - Russellville

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Profile picture for falsedawn
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<yawn>
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July 22
Profile picture for BMFPitt
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In the Russellville, AR area...home values on average rise an average of 2.5% per year since 1985.

So you're bragging that house prices there almost keep up with inflation?
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July 22
Profile picture for dacolan
Contributions: 474
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Since October 2009

That the Russellville, AR market has yet to stabilize should be reason enough.

Since '06 the Russellville median has dropped over 22%, and over 12% in just the last year.

If you avg 2.5% annual appreciation (this is actually close to the historic national avg for residential RE over the past 100 years), it would take more than five years just to make back the 12+% lost in just the last year and nearly ten years to recoup the 22+% loss from the past 3 years. And we're simply talking break-even on purchase price. The wait is longer still once you take into account REA commissions, closing costs, taxes, insurance, HOAs, Mellow Roos, maintenance, repairs, etc.

Of course, this is based on the false assumptions that 1.) Russellville, AR has stabilized and reached bottomed (still falling according to Zillow), and 2.) that this market returns to historic norms of appreciation the day you close escrow.

In other words, there's no telling how long you'd have to wait before you could start that equity clock, much less determine how much lost equity you'd have to make up while waiting for the market you would have just bought into to stabilize and return to historic norms of appreciation.
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July 22
Profile picture for azrob
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The problem with this kind of biased analysis are several fold:

1. you mention the money "thrown away on rent" Ok, how much tax,insurance, interest on the mortgage, and maintenance will a homeowner have paid? [It honestly should be a personal embarrassment to you to post such ridiculous, and thoughtless things. It certainly embarrasses me about being a Realtor, when you and others do it. ]

2. So, assuming the actual cost of the rental came out the same as the cost of owning, outlined in 1 above, you would still be behind. To sell the home, you are going to encounter fees of about 7% minimum of the sales price. So actually, the owner would break even IF all expenses were the same, and the home went up at least 7% over the timeperiod.

3. Risk/reward. Home prices are dropping, and there is considerable economic risk of more drops over the next few years. [lots of data such as unemployment, rising foreclosures, rising loan delinquincies] So, unless home ownership turns out to be MUCH cheaper, it is essentially gambling for many people right now.

Mr. Ladd, Don't offer financial advice if you are going to leave out pertinent information, and skew your own weak analysis.
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July 22
Profile picture for Randy_H
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No Azrob, the problem with his analysis is that, if you consider average  yearly temperatures, it never freezes in Chicago.

In the Russellville, AR area...home values on average rise an average of 2.5% per year since 1985.
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July 22
Profile picture for Pasadenan
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Since January 2009

LOL!

This reminds me of the statement I heard recently about "BMI" (Body Mass Index (K*weight/height^3)) being a good measure of obesity and health risk was equivalent to giving the average temperature of a person with their head in the oven and their feet in a bucket of ice!

The average temperature may be just fine, but the person would be dead shortly all the same.

The person suggested that measure of the waist and fat around the waist would be a much better indicator and just as easily measured.
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July 22
Profile picture for real estate mike
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Why Rent? no getting under the sink to fix a leak, no insane property tax bill, if your lawn mower breaks who cares, hard to be upside down on an apartment $50k(lol), no homeowners insurance deductible, no  trees to be trimmed fence to maintain, common tennis courts, swimming, mail drop off. The real question, Ladd, is why buy? 
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July 22
Profile picture for azrob
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funny you mention BMI! 90% of the NFL is ready to die by bmi!
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July 22
Profile picture for Lady Chattel
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So is he suggesting I buy a home so that after 7 years I can sell it and hand 6% of my money off to the REAs.....funny how they NEVER factor that into the equation........I am perfectly happy that after 3 years I will have thrown almost $100K out the door as a renter......cause after owning my last house for 3 years I threw that same amount out to the REAs and the people who bought my house and the air for the amount the house went down in value........

Those little equations made sense when prices were upticking but not now, and not for some time.
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July 23
Profile picture for mysql
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According to BMI, Arnold Schwarzenegger was morbidly obese in his prime.
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July 23
Profile picture for EclaTek
Real Estate Agent
Contributions: 30
Here is an interesting article:

msnbc.msn.com/id/32051101

Buying is now cost-effective for some renters

Many renters debating whether to buy or rent their homes are realizing that the increase in affordability, coupled with low interest rates and tax incentives, are tipping the scales toward homeownership. 
 
MAKING SENSE OF THE STORY FOR CONSUMERS
 
•    An analysis of 45 metro areas by the Associated Press found that the gap between the monthly mortgage payment on a median-priced home and the median rent has decreased from $777 a month to just $221 in the past three years.
 
•    In markets across the nation, including the inland areas of California, prices have declined by nearly 40 percent, resulting in rising sales as first-time buyers use a federal tax credit that covers 10 percent of the home price, up to $8,000.
 
•    Favorably priced foreclosures in some markets are drawing multiple bids.  Many housing experts believe that as supply and demand even out, home prices will eventually begin to rise, but for now most buyers are having little difficulty finding affordable homes.
 
•    Qualified first-time buyers may be eligible for loans insured by the Veterans Administration (VA), which does not require a down payment.  Another loan product gaining popularity are those insured by the Federal Housing Administration (FHA), which require only a down payment of 3.5 percent.
 
•    It is important that potential home buyers not only look at the monthly mortgage payment compared with their monthly rent payment, but that they also consider other costs associated with homeownership.  These can include homeowner association (HOA) fees, insurance, maintenance, and utilities, which most renters are not responsible for paying.
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July 24
Profile picture for Lady Chattel
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 It is important that potential home buyers not only look at the monthly mortgage payment compared with their monthly rent payment, but that they also consider other costs associated with homeownership.  These can include homeowner association (HOA) fees, insurance, maintenance, and utilities, which most renters are not responsible for paying

Ignorance!  My rent by defacto pays for the owners taxes, HOA, etc........it is rolled into my rent, and when my rent is HALF of what owners around me are paying to live in the same place it is pretty much cut and dried the most ignorant thing to jump in and buy!  

All the Associated Press lately touting good real estate and economic news is pure gov't back bull crap meant to convince the sheeps to go to slaughter to try and bolster the economy that really isn't in a rebound.  
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July 29
Profile picture for Randy_H
Contributions: 4390
Why rent?  Well, I rented from about the start of this graph until that last little "$" you see, which was my purchase. 

And I still fully expect that this home will eventually lose some value.  But why I rented was so I could save many hundreds of thousands represented by the difference by buying at a mid/late 90's price (adjusted for inflation).  I rented because sellers don't sell at that sort of a price until forced to do so, and even then those deals are hard to get and take a ton of patience and dedication.
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July 30
Profile picture for Lady Chattel
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Since October 2009

Question should be why buy when you can rent......for HALF! 

Several homes in my neighborhood have come on market, "owners" have been in the homes for exactly two years and are listed for less than the purchase price.......so who is the bigger fool, the renter who rented the same home or the owner who is getting spanked on the sale.......
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July 30
Ownership in land is much like owning a money market account...sometimes it will be down, but it historically comes back up over a period of time...Ownership of anything, whether it is a car, truck, house, land or business; of course...it is a personal preference.
If you prefer to own, right now in Russellville, AR....it is a very good time to buy. Especially for the people who want to use the new tax credit.
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August 10
Profile picture for klarek the realist
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Since September 2009

Ladd, see Roberto's post above and tell me that you don't feel like you just got slapped.
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August 10
Profile picture for Eric142
Contributions: 51
Ownership in land is much like owning a money market account...sometimes it will be down, but it historically comes back up over a period of time

Money market account, you keep using this phrase, I don't think it means what you think it means... 

You might want to go look it up before trying to give investment advice, particularly around here.
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August 10
Sounds like a Great Ad !

"WHY PAY RENT WHEN YOU CAN BUY ?" 

It's a no brainer . 

Own your own home .  

Bill good one

  
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August 10
Profile picture for dacolan
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Since October 2009

It's a no brainer .

With so many thoughtful and well-articulated counterpoints expressed earlier in this thread, is this the best argument in support of this misleading premise we can expect from REAs fishing for their next commish?
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August 10
Profile picture for sunnyview
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Since January 2009

Yes and why walk when you can fly. Why bother to chew when you can be fed through a tube. Why marry when you can pay for a lap dance. Look CT may not have been hit as hard as CA with the downturn in the market, but your blanket statements implying that buying fits everyone makes you look foolish especially after what the RE market and the country has been through. I think there may be reasons to buy in some markets but buying based on the broad representations made by agents is not on that list of reasons. 

Buyers need to do their homework and be careful about the choices that they make in what they buy and whether to buy or they could still end up underwater with millions of others who jumped in before them.
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August 10
Profile picture for jimmy57
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Here's a Zestimate chart for the house I've been leasing the past 2 years.  The owner once listed it for nearly 700K.  Certainly a Zestimate is not gospel, but in this case it's not far from the reality.

The rent I pay doesn't even support the LOW valuation shown here, with the 15X annual rent calculation for income property.

In fact my landlord has been paying, big time, just to keep an option on this piece of RE.  He might have made break-even if he had priced aggressively low 2 years ago, but now he is far underwater and being pulled deeper every month, with every mortgage payment, every tax bill, every repair (all those things I don't worry about).

Because my rent is well within my means, my "house money" --with which I might have bought this house in 2007-- is still completely intact.  I am far better off for having been a renter, although nearly any used-house salesman I might have asked over the last 3 years would have counseled me to buy.



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August 10
Profile picture for Lady Chattel
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"It's a no brainer" 

Yeah, that pretty much sums up most of the NAR BS that spews thru the REAs mouths (or shall I say keyboards).

Every buying calculator still shows that buying is foolish (in my situation) because plain and simple prices are still too high.   When you look at the entire US avg home and US avg salaries there is still a large disconnect between prices and incomes.  Banks reigning in their lending practices helps constrict more, well they got American's to spend more than they had for a few decades so all these defaults and contraction is their own undoing.   Let's start requiring cash for most things, take away the 10 year car loan, and on and on and so that American's aren't forced into slavery to have even a tenth of the type of life their parents had....without credit and a noose around their neck just to buy a home. 
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August 11
Profile picture for Pasadenan
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Why "rent"?  Because I don't need a Moving truck in my yard to maintain, register, and take up space when I'm not moving anything.  And because U-Haul can rent it for a fraction of what it would cost to own it.  Same thing applies to scaffolding, hydrolic lifts, crains, backhoes, dozers....


I already own one home and have no use for 35 more!  If those realtors that keep advertising that the 20 MILLION SURPLUS homes in the United States are such excellent deals in spite of prices continuing to drop in half and no available population to fill them really believe the lies they tell, they should stop "selling" real estate and buy 100 houses each!  Or, lower your commission to  negative 10% (you pay the buyer and the seller for taking your "junk" off your hands), and we MIGHT believe that you were not just out "begging" for money.

Really, I've seen pan-handlers at the freeway off ramps be more effective in their requests for "handouts" than these realtors that constantly have a need to "propagandize".
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August 11
Profile picture for MikeEmery
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Since December 2008

Hey were you the guy on Colorado Avenue that wouldn't even give me a stinking quarter??

I need it to get the stains outta my gold blazer.

Ah well, guess I can cover the stains with some 'Realtor' pins.
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August 11
Profile picture for Pasadenan
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Besides, if "home ownership" was such a "great deal", why would anyone ever "sell"?  Realtors should be out of business since there are more than enough houses for everyone to own at least one.  And next time a telemarketing Realtor calls to ask when you are going to sell so that they can get your commission, just tell them that the National Association of Realtors tells people they should never sell.

Never mind that no-one ever "owns" any real estate since it can't be taken with them and belongs to the govenment, is controlled by the govenment, and is taxed by the govenment, and the goverment and real-estate will be there long after you are dead.  And with the inherritance taxes the way they are, the government tries to minimise passing it on to ones heirs as well.
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August 11
Profile picture for Randy_H
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Why think when you can get licensed to peddle used houses?
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August 12
 

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