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Rent vs Buy? The Definitive Interactive Guide
With the only debate consuming the broader investing public these days (and for the past several years) being whether or not entity/bank/country X will receive a taxpayer bailout or not, some forget that there are actual fundamental, cash flow-based drivers to making economic decisions. Key among these has always been whether to rent or buy that most capital intensive purchase (for most): a residence. Courtesy of Trulia we bring you the definitive interactive guide on whether it is currently cheaper to buy or rent in various metro areas around the country. It is immediately evident that real estate in New York continues to be massively overpriced, with the option to rent the only economical one, although that will surely not prevent this year's batch of Wall Street bonus heroes from purchasing multi-million Soho lofts, especially if the Chairman decides to lend a helping hand. How about everywhere else? "Trulia looked at housing prices, foreclosure activity and job opportunities, and found that it’s cheaper to buy a home than to rent in 74% of America’s 50 largest cities." This probably means that the days of rent-based inflation are numbered as at some point the rental herd will once again resume buying. Of course, for that to happen, the Fed will have to give an indication that the current ZIRP "blue light special" well eventually end and thus inspire a sense of urgency within the consumer class. Too bad that the Fed just made sure virtually no bidside interest will exist for at least two more years, or until the previously given mid-2013 target. As such, we expect renting to continue being the dominant form of real estate procurement, which just like the farming bubble, will soon make even living in a 300 sq foot box in Midtown impossible for most.
Fully interactive chart after the jump
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What about squatting? It seems to work for a few million of my fellow Americans.
Let us see here, you have the ever increasing home taxes, insurance premiums, upkeep costs going up... Have done the math and renting is better overall. Also factor in closing costs and costs when you sell a home.
He really needs to show us his math.
I call BS too.
Add in what happens when you have to sell, and realtor fees eat 6% of the total value - likely a number higher than your net worth.
Trulia is assuming everything is daisies in your career for the next 30 years: "Trulia ... found that it’s cheaper to buy a home than to rent in 74% of America’s 50 largest cities" And if you google them - surprise, they're a realtors' group trying to sell homes.
exactly. lol... according to any nar representative, there has never been a bad time to buy a home... ever.
Speaking of which, be careful dating as single females who are RE agents seem to do almost anything to sell you a home nowadays. Am not kidding, went on a date and the female RE agent was trying to whore RE to me within the first hour of our date! You HAVE been warned!
sheesh dude, someone's gotta pay for that carefully manicured Humvee drivin' blackberry wielding lifestyle you found attractive enough to ask out!
True, though always remember behind every woman are four guys who got tired of putting up with her bullshit.
lol, you four guys should cut out the middle-woman, you'd be happier, eh?
Gents be advised, If it Flys - floats or Fucks - Rent it !
there is no balloon payment
it's definitely more honest, not a bad thing to be.
Haha well put
Never used a realtor, never will.
Get on MLS and sell it yourself.
When you buy, you don't pay commissions unless you have your own agent.
Best advice is to get a legit top to bottom inspection from your guy, not the agent's recommendation
It's sick that you have to pay some1 5% just because he was there to give you a handshake while buying a house not to mention all the fees for paperwork the government pockets,
What happend to the times when you just owned things and could dispose of them at your pleasure ?
They do offer some valuable insight however.
Like when you enter the kitchen and they say "this would be the kitchen", you know , in case you didn't know what that was...
I call BS as well. But not because of the math for total ownership, but because it's a rediculous average of the markets in each city.
Living in the Denver market, which according to Trulia is 150-250k, I can tell you that 250k is the rock bottom minimum for living in the downtown area - whereas the rent range they quote is about average living in the same area. If you wanna buy in one of the many crappy suburbs for 150k (including one of the worst hit foreclosure markets in the country) help yourself, but then again your rent in the same market is gonna be about 25-50% less than Trulia quotes. Totally skewed.
This is also a stupid assessment because no one is able to qualify for a loan to buy, that's why rent is so high. Simple supply and demand. Now is also a great time to buy 1 kilo gold bars, but who can afford it?
agreed. principal + interest + taxes + insurance + landscaping + maintenance/repairs + being anchored + potential further drop in value + potential decline in neighborhood + ??? = not worth it, in my opinion.
Safe room, gun safe(s), bullion safe, security system, video surveillance, water purification, bullet proof glass, reinforced walls, windmill, solar...
Different analysis applies to the family farm. That's worth owning, especially if you don't need a mortgage. Zombie apocolype notwithstanding.
With interest rates being very much negative, I don't understand why anyone wouldn't take advantage of it. It's free money!
The mortgage is also a free put option in case the market collapses and it's a free put option on interest rates. If the rates go up, the mortgage is worth less. If fiat becomes worthless, pay off the mortgage with worthless toilet paper like they did in Wiemar Germany.
and if the currency doesn't die as soon as you hope, while the prices of comps continue to decline and your wages remain stagnant at best?
I don't get any wages.
It isn't a matter of hope; it's a matter of reasonable expectations. Current real inflation rates appear to be in the 10% range, or 7% higher than the mortgage interest. That's more than the payments!
If need be, I can sell some PMs and pay off the mortgage. Or I can move and abandon the place, just like a renter.
You can do about anything if you're willing to stiff your counterparties and lie under oath... the question is whether you are willing to do this, given the potential consequences. Do you live in a recourse state? Will your creditors sue you for a deficiency in the event your non-wages are insufficient to tote the note? I say this because your foreclosure may occur far sooner than your hedges' ability to pay off your creditors. Thus, you get stuck in the liquidity trap fueling the cash for gold stores and your insurance policy lapses.
Stiffing counter-parties and lying under oath are The Rules of the Game in America now. If you don't like those rules, move. I didn't make the rules. I'm just one of the proles.
I don't live in a recourse state, but that doesn't mean I expect to default on my mortgage. It's all a numbers game, not so different from your world, the main difference being my predicted outcome is much more likely than yours. I don't gamble by buying insurance policies except where required by law or the mortgage company, so lapsing insurance policies shouldn't be a problem. Gold should provide necessary liquidity for the foreseeable future. I don't expect to see the time where gold can't be exchanged for fiat. Fiat for gold maybe not though.
The entire purpose of the exercise is to keep your gold until it pays off... i.e. to collect on your insurance policy, in the event of casualty... If you have to liquidate your holdings, you are counteracting your ability to hedge and are taking additional risk via holding a depreciating currency... You want to avoid liquidating your gold at all costs... If you are going into the matter with the understanding that you will dip into your stash during liquidity crunches, you are missing the boat (and logically contradicting yourself given you can admit that not always will you be able to replenish your gold holdings should you be forced to liquidate).
Debt, in our present environment, isn't a panacea...
<<If you are going into the matter with the understanding that you will dip into your stash during liquidity crunches,...>>
There is no such understanding that I will dip into the stash to pay off the mortgage. It's just an option, one that would be examined in light of whatever the alternatives at the time are. The point is it is an option. Having all one's capital tied up in a piece of real estate removes that option. Who knows what the future will bring for sure? Maybe it'll make more sense to abandon the real estate (like many in Detroit have) and move to some more agreeable spot.
The stash is there to spend as needed or wanted. It's not there to be used as a boat anchor.
Debt's not a panacea. I never claimed it was. It is, however, an excellent bet when the real interest rate is hugely negative. It is important to structure debt so that it is payable.
Although you do not admit you plan on defaulting on your mortgage, it appears that you do plan on defaulting in the event your gold option does not come to fruition. In other words, given we cannot know the future, it is patently impossible for you to structure your debt so that it is payable unless you already hold the physical money in your possession and it is incapable of leaving your possession until the mortgage payments are due (if so, why would one need a loan?) or you have a guaranteed stream of income (short of the first few dogs getting table scraps from the printing press, I'm not sure we're getting much action).
Essentially, you have an option many of the rest of us do not... in that your creditor may not seek a deficiency judgment if you turn in the keys... that's fine, just own up to your expectation to default on your creditors in the event we have a period of deflation/dollar appreciation/money supply contraction.
Further, the only consideration is not whether your borrowing rate is cheaper than the real interest rate... if so, the U.S. would be tip top. Again, unless you're omniscient, it is impossible to knowingly structure your debt so that it is payable... you can make an educated guess, but sometimes you're just blowing a bubble... that may just be around the corner from bursting. (aside from the fact that I sincerely doubt you plan on attempting to repay your mortgage to your financial ruin... which makes any determination as to whether the debt is actually repayable moot).
Don't be scurred. Be proud of your free money, backstopped by the taxpayers, utilized in such a manner to provide you with a risk free option to hedge against inflation. Own it.
Bowleevil, sounds like a great rental. How much you asking?
Those were the improvements he had to make to his landlord's premises in order for the property to be habitable.
My personal experience here in Houston agrees with you. This economy sucks, and workers have to stay nimble. Not to mention, the city has a bulls eye on your back for tax revenue. Anyone think it won't go up?
i used to live and work in "clear" lake, so i'm with ya. the property taxes in texas are essentially in lieu of state income taxes, so the tab is still quite high even if you own your home outright. to quote jackie chiles... "it's outrageous, egregious, preposterous."
+1 for Jackie Chiles reference.
In Houston (in the loop) there is no middle ground w/ rental. It's either a million dollar tear down, or a dump that someone is renting out till they tear it down.
I gave up and bought, so I wouldn't have to live in a dump, and not have to commute 1.5-2 hrs a day.
How about doubling up? Had my youngest son return home
Been there done that across a few generations.
In the day houses were built big and strong to hold several generations.
Now? You make do.
My cardboard box has cable, hi-speed internet, a space outside for cooking, everything. I steal electricity from the lamppost nearby. But I have to get outta here at 6:30 AM every morning when the sprinklers come on.
Maybe you should call a plumber. He should be able to convert those sprinklers to a bathing facility.
Squatting can also begin in month 2 of a 360-month schedule, but the catch is qualifying for the note. No mention of down payment. Isn't the bar a little higher these days? Buying may be cheaper, but how do they get in the house?
Kid me not.
So finally, the housing bubble served well US citizens' interests.
It forced the direction of allocation of capital towards the US market on a world scale, later to discover that the US citizens could not even buying the houses.
But who cares now? The houses have been built. The housing inventory has largely been increased and US citizens have plenty of housing offer they could not have afforded if they had to pay for it.
After that, of course, US citizens,as they are duplicitous, keep claiming their government does not work for them and that US citizens have been robbed by the rest of the world.
Kid me not, the US citizens nature is eternal.
Kid me not, are you Chinese?
All of your philosophies are belong to us.
"All your philosophies are belong to us."
http://t3.gstatic.com/images?q=tbn:ANd9GcSp93z_OmuNWabZ1fjrBMvdIEOpBPFAQ...
Obvious Chinese plant is obvious. They're pretty common at sites that voice any sort of dissatisfaction about government. The Chinese usually send people with better English to propagandize us. It seems like this guy needs to go back to school.
LOL
AnAnonymous does indeed seem to be Chinese troll. Recent comments "read like fortune cookie". Early comments attempted good English to blend in, but at some point it seems the need to keep up a strong facade was no longer required, probably because we were onto the game after a few posts and called it.
I don't write Chinese at all, so I should not make fun of someone posting reasonably well in a second language, but them I am not posting on a Chinese economic forum about how stupid and two-faced all the Chinamen are.
Early comments? How cheap propaganda.
Is it that hard for US citizens to be factual on obvious things?
Is it that hard to write something "the first comments I read" or stuff like that?
Early comments... Funny one.
As a sidenote, usually, expansionists think that their language will prevail. It is never the case. English is not the world wide language. Broken english might be.
Anticipation is better than reaction.
/chuckles. You have the strangest way of crying. Do you get paid for this? Considering most of us complain for free, you guys might pass some coinage over our way.... Like you said, we're all broke.
All broke? US citizens are less broke than the others. They have just robbed blind the rest of the word to get more houses for free.
English may not be the world wide language, but it is the language we use on this website. If you're going to post in english, get the grammar right. If you haven't mastered english yet, you should post in Chinese. Doubt you'd get many reactions, though.
Ah, the marvellous US citizen state of mind.
One has to belong to a specific group to state obvious facts.
Because US citizens could not observe the same. Actually, they do but their victimology urge being sharp, they can not tell and anyone who breaks the spell (US citizens were not victims of the US RE bubble. On the opposite...) must be an outsider. Because no US citizens would spoil the pleasure of feeling a victim after committing such a robbery on the rest of the world.
Think about it, houses are getting cheaper and cheaper because foreigners lose their savings so that a US citizen gets a house he can not afford and the blame of the world crisis can be laid on some negroes somewhere in the world, who does not even eat and has no house.
That is the stuff dreams are made of for a US citizen: robbing and laying the blame on negroes.
Such a wonderful world under this US world order.
What the fuck are you talking about?
I think he's talking about feeling up negro women after he victimizes them and being upset that it is illegal in the US. Just extrapolating from within his post of course.
LOL, +1000
In the USA using the term "negro" is racist and might get you thrown in jail for a hate crime. So the darkies are called by other terms like "African American" while caucasians are just plain white. An insult to be sure. However, your comment did spark a bit of a curiosity. Are darkies still called negro outside the politically correct universe? Perhaps our Asian and European colleageus could shed some light here.
It's a dog-eat-dog world out there. Always was and always will be. If you're Chinese, you should be well aware of that.
It is a dog eat dog world out there. Why not?
But in this world, US citizens are a specific kind: they eat others and want to claim others are eating them.
They are victimizers and want to claim they are victims.
It is the way it happens in this US driven world.
What people, including Americans, want others and even themselves to believe and what reality is often bears little resemblance to each other. It's called "image".
China wanted to be part of that "US driven world", aka Western Civilization As We Know It, and made a deal with The Devil (and vice-devils Nixon, Clinton and Bush) to industrialise and put their proletariat to work in factories churning out more consumer goods than the people with the money had any use for. They enslaved themselves to Wall St. Surely China's leaders were intelligent enough to see the consequences.
America "gave" China her industrial capacity and technology. China now "gives" America the fruits of her labors. If China stops taking those worthless scraps of American fiat paper for her people's labors, those people will no longer have jobs and will need to go back to subsistance agriculture (which is rapidly disappearing) or worse, to more "revolutionary" exploits.
When one sells one's soul to The Devil, one shouldn't cry too loudly when The Devil uses that soul for his own devices.
Beware of Greeks bearing gifts.
idiom deficit
But a main drag on the "buyers" will be the amount of upfront money one must accumulate before even considering the possibility of buying a home. All renters have to do is come up with the rent. To come up with thousands of additional dollars in addition to the rent is a herculean task for most
Not to mention that much of the activity at the lower end of the market is all-cash. Between the upfront cash requirement, tight underwriting standards (remember when a stiff could get a home loan?), much deteriorated credit scores, and higher number of unemployed or self-employed, I'd say we'd have to wait quite a bit for the ownership society to come back.
On the other hand, the yield chase combined with lower rental-grade inventories has caused investors to engage in bidding wars for cash-flowing properties, at least here in Fla. The prevailing wisdom, now becoming practice, is that nominal rents will continue to increase.
Like a dog returns to its vomit a fool returns to their folly.
Yield chasing, leveraged idiots will soon experience some real pain. While there may be some reversion to the mean in occupancies and rents, there will also be reversion to the mean in interest rates. That 3 or 5 year call will be a bitch when you are technically non-compliant and they ask for an equity infusion and you ain't got it.
There you have it. That thought process + bureaucratic interference with free markets is what made the bullshit financing programs that caused all the trouble. Little to no money down + financing of closing costs = loan to value ratios that were more than the purchase price. But prices never went down and the mortgage company could off the paper to Freddie or Fannie and keep the on-going servicing fees so the risk was "spread" over the entire base of tax payers (suckers). Everybody had to eat the bad paper including the folks who never participated in the scam.
This American system of ours, call it Americanism, call it capitalism, call it what you will, gives each and every one of us a great opportunity if we only seize it with both hands and make the most of it.
Al Capone
Go where the money is... and go there often.
Willie Sutton
Now nobody get nervous, you ain't got nothing to fear. You're being robbed by the John Dillinger Gang, that's the best there is!
John Dillinger
farming bubble??? couldve fooled jim rogers!!
Farmville is quite the game these days.
the rental herd will once again resume buying
And yeah, that 350 credit score shouldn't be a problem....
Does this analysis take into account the next round of layoffs? 120,000 posties aren't going to be buying homes over the next couple of years that's for sure.
no unionized postal worker will get axed under the protection of the labor loving dem controlled senate.
Wanna bet?
absolutely. no chance. whats the wager spas?
50 bucks, even odds.
If it floats, flies, or fucks rent it!
Dog
I'll buy the Float and keep it as a home/travel alternative means of moving. I'll rent the fly until skycars get cheap enough and I wont rent a fuck. It's that simple.
Here dog...let me help:
If it flies, floats, or fornicates, it is cheaper to lease than own...."
My issue is, after having owned a home and paying RE taxes up the wazoo not to mention host of other quasi-mandatory expenses, I really don't want to be tied down to the system anymore. I can break my lease much easier than i can sell a home.
Growing unemployment and the impending correction more at stock market crash doesn't make my confidence soar, alleged bargains notwithstanding.
Yep, better being unemployed and renting a house than being unemployed and owning a house.
US world order.
You have it backwards. If you're unemployed and own you get at least 2 years rent free. Your landlord will get your ass thrown out a lot faster than that.
you all have it wrong , stop paying your mortgage AND rent out your house .......cuts out the middle man
That is US citizenism at its brightest. Best answer. Hard to improve on that (even though US citizens mind will find a way, I think)
They already have.
The fliers in the VA was exhorting the Veterans to buy a small home and stop paying someone else's mortgage plus income out of your own pocket (Renting a house)
And they can make the sale happen to any renter with a total cost less than what they pay now. Without any more fear of the landlord kicking your ass to the curb.
It's little wonder that government has such a vested interest in an "ownership society" no?
Sold my house of 8 years in January, paid off debt, and all my change went into gold and silver. Renting now and FUCKING loving it. A house anchors you to a locale, even when there is no employment, which for me was very stressful thing to contemplate. Now, If things turn south in my area, my family can pick up stakes and vamoos to greener pastures. It has taken a lot of stress off of me.
I bought the American dream of home ownership pushed on us, hook line and sinker. Took some real lumps along the way, but am wiser, and will be more prosperous in the future, due to the experience.
"Man Charged With 'Using' Treasury Secretary's Account to Pay Off Mortgage"
http://www.foxnews.com/politics/2011/08/16/man-charged-with-using-treasury-secretarys-account-to-pay-off-mortgage/#ixzz1VDaAjPuG
looks like Henry Paulson owes Citi $353,000
Genius.
Squatting > Buying > Renting........ make the system work for you
Don't pay your property taxes and tell me if you own your house?
You are a serf, you don't own your house.
In arkansas if you can put wheels under it and move it. It's not a home. A personal property. There are homes up to 60 feet wide and 90 long that can be split into 3 sections and transported to a new land at any time you like.
Yeah, but it's Arkansas...
Who needs Hawaii when you got the Ozarks!
Ding, ding -- we have a winner! We all are renters. The only difference is some of us have longer leases, with some degree of rent control, than others.
Quick! Buy now...House prices never go down!
Now watch the next Bubble Housing market collapse:
Stalwart Canadian Economy at Risk of Contraction
http://blogs.wsj.com/economics/2011/08/1...
House prices go up and down.
The 12,000 dollar 1925 coal heated home turned into a 1988 45,000 dollar sale on oil. We did not make money on that sale, it went strictly to paying for a nice rest home for the occupant who was no longer able to live alone. Otherwise I would have inherited that house outright with all it's cares at a very young adult age with just a minimum wage shit job.
That house is still there, the block it sits on is all Gangland now with shootings and such. Screw it.
Location, location, location!
"The nation's suburbs — once the symbol of the American dream — are well on their way to becoming tomorrow's slums, some experts say."
http://realestate.msn.com/article.aspx?cp-documentid=21179977
I sold my house in 2004...a little before this mega boom. As more and more houses were sold with NINJA lonas to people who could never possibly afford the upkeep I realized this would turn out bad.
Indeed, that neighborhood is now borderline slum---lawns unmowed, broken windows, rampant vandalism at night, etc. So sad this Great Nation is having such problems. Giving anything away for free will awlays lead to problems. This time it is a HUG problem. Luckily, I rented and moved.....to a safer neighborhood.
GL!
um... the combination of no credit score... tight credit in general... and the knowledge that a house is not a retirement account any longer, and never was, might be enough to blow this theory all to hell... real simple:
old house payment = $3,200 per month
old monthly nut = $8,000
-----------------------------------
current rent = $900 per month
current nut = $3,000
income = same = CHA CHING$$$$$
-----------------------------------
even my gold plated wife can now understand the dynamic that +$5,000 /mo savings/investment is a good thing...
My wife and I agreed that trading bullion and metals will be a nice work for me to do in time. But right now we are shaking off every single chain that encumbers us and prevents from freely trading these things without margin or debt.
For your consideration, Seagull- it may be better right now to make minimum payments and stack. I have no crystal ball, so that could be bad advice, but we are coming into a really rough patch, and liquidity might be far more valuable than simply being debt free.
I'd rather have a handful of gold coins than a paid off house right now- and I say that as a guy who has made a lot of extra payments over the years to shorten the mortgage. Depending on what happens, being able to take off fast and buy a new home outright somewhere safer or with more employment might be a lifesaver. The credit hit of abandoning the exisiting property won't matter much if there is no credit to be had anyway.
And, if the hyperinflation scenario plays out, you can clear old debt for pennies on the dollar if you're holding metal.
The home ownership trip is visiting hell right now. The trip will not get better until all the backed up REO gets puked up and and regurgitated with 20% less fiat fat.
We cannot dare buy anything but a new fresh built home or have one built to code. Anything going back to at least 1998 are all suspect. I would not touch any of the used properties with a 10 foot pole.
We updated things in our home and reduced utility outflow by several hundred dollars a month. It only takes about 130 dollars to heat, cool, water and cook now. We could eliminate that and gain income exporting by solar to the grid.
Last year at this time we were paying approx 700 dollars a month using stuff that was 40 years old and was running 24/7 and unable to keep up with the heat.
Ahh, to be off the grid; my dream but not able to do it now. Ya, cutting costs is like earning extra income but you don't get taxed on it. Use the mortgage write off and lower all your expenses, and it is better than a raise.
I called my cable operator, comcast, last week and told them I was thinking about leaving and going to satelite, and they immediately gave me $20 bucks discount a month for being a "long-time customer". I will switch to satelite before 1 nyr. when the discount expires.In addition I switched my home office phone and fax to Vonage from verizon 6 months ago and save another $30.00 /month. Also switched family cells from verizon to Metro for another $30/month savings. Started a nice garden, and take care of my landscaping for the business side and home side myself for the past 2 years. Perform most maintenance projects myself now for my shop/business and home. Switched from a C-corp with a few employees to a sole prop. just myself now.
There are so many ways to cut back and save, and it is better than making xtra income unless it's under the table.
dont forget to include the ever increasing property tax payment into the monthly mortgage amount due.....even with a fixed rate your monthly payment goes up EVERY YEAR
I call junk on this chart and the assertion that renting is a better deal. Buying a house is a 30 year trade. Who knows how far the worth of that house can fall in the future. Does the chartist have a crystal ball?
The risks cannot be computed. Renting is safer, period.
We paid ours off in 7 years. It was a 15 year. Taxes are miniscule on the homestead act. A few hundred at best each year.
head away from the cities if you can... taxes on land are lower... now's the time...
There are risks with renting too. The risk of needing to move on someone else's schedule (along with a lower monthly outgo for owning incl. the mortgage payment at 3%) convinces me to own. I rented for a while after I sold everything in 2006.
I also get to concrete in a large floor safe and keep a big nasty dog.
All real estate is local. The numbers work out differently depending on where you are.
and found that it’s cheaper to buy a home than to rent in 74% of America’s 50 largest cities."
Until ( I seriously doubt (like the CBO,does the CPI and leaves out the Food/Fuel prices in their numbers.) figured in the taxes, and up keep.............cheaper to buy?, if you can get credit approval, and keep your job.............Bwahahahahahhaha
The only advantage here is the city cannot seize it from renters for taxes and renters do not pay upkeep,and you can move on a dime.
At the present time I am wishing I did not own free and clear, scares crap out of me.
What was one of the happiest days when it was finally our's free and clear,now is a burden.(because of political / fiscal (govt ) uncertainty.
+1
We are free and clear. We will never rent again. I rented for myself in a small city back east on a third floor complex apartment. Every month I had to always think about the rent first, utitlites second. Before anything else at all. I made good money flatbedding however the hours were brutal and there were times I fought fires in the kitchen because I would fall asleep cooking at 1 am trying to gain strength to get the wheels turning precisely at 2:30 am for a winter run into the mountians. The amount of random ill-motive visits I had there, were clearly in hindsight; an attempt to case my place and set up for a later hit or invasion for anything I might have. A variety of ruses were used. And there was the laundry. Ugh.
We live in a small home with a bit of land. We sometimes think to stay a while and add on instead of selling. Or perhaps buying a cabin sufficient for our needs and moving to a few acres of land in the mountains. However Debt removal is front and center. We will just have to stand our ground and grind it down.
Many people in our area has added on, replaced roofs or are adding on. The actions they are taking is quite visible and motivating.
No Renting is out. That is serving a landlord. My family had a landlord who owned 9 places for rent in the same building. Our family did well as long as the Tenants behaved and paid the rent on time. Once or twice we had go in and rebuild a unit and get it ready to rent to someone else. We could literally see the old world war two society and local... ethnic/work etchi make up deterorite before our very eyes. We sold that and got out just in time. Thank god.
Regarding space.
You can have some space and make it work. I did for decades in a walk in studio sleeper type tractor trailer while at work on the road. My commute was literally two steps to the office chair (Driver's seat) everything I needed had it's spot all around the cab and there was house power off a aux genset for coffee pot and computer/TV. All the comforts of home including a toilet.
However. You kind of get... cramped after 6 - 9 months. We would run March to October working as hard as we can to make money. Then stay at our real home through Chain season not worrying about driving on ice or anything like that.
If your space is a touch too small, get out. Your mental health depends on it. And by the other coin, expansive space will only get filled with stuff you barely touch. What good is it? Think of empty space as a workshop or a wasted effort by your home heat and air to maintain a environment.
people around here are just renting the other half of their duplex's in the hope of just being able to pay their taxes... not like they make any money off renting it out... they just try to keep up... I have to pay taxes either way, and if I just pay taxes and still have a place to live... BINGO...
Wouldn't touch a house in USA. The chart if you look at it is basically states that most of the buy decisions are kind of fuzzy as in "it may be better to buy than rent". Forgive me if I am wrong but if you put your bets on a house, it is not exactly liquid.
cash 5% down on a 500k house= $25k
Pay your own utilities= $
Pay for any maintenance= $
Pay for increased city taxes= $
Deduct interest= a plus
Pay for yard upkeep= if you do this yourself then what is the real cost per hour?
Risk- interest rate increases (may be minor but you are on the hook for this thing for 15-40 yrs)
Liquidity- if you buy in one of those better to buy cities, how long if ever could you sell it?
selling fees-
Uncertain price when you want to sell
Rent
Damage deposit= 1 months rent
renters insurance= $50-85 a month
And that's about it. Oh, sometimes you have to pay for parking, if in a apartment building but sometimes you can get underwater condo owners that need to rent out, to throw in the spot for free.
Don't like the area/building, give 30 days and leave.
Lose your job= get a cheaper place.
More portable- in unstable times people hop all over the country for work so if you are bogged down with a home in your old city you end up paying the mortgage (french for "death pledge") plus rent or another death pledge in the new city.
When I look at all the work people do to their homes, its crazy- almost every weekend there is something to do. Me, I would rather even pay a premium for rent and not worry about anything and always be liquid. And have my weekends totally free.
well done... simple math...
shitty neighbor moves in next door... gone whenever you like...
Alternatively, how about this math for you:
2007: Buy house for $70,000 in cash
Property taxes: $0
Utilities: About $20 a month
Mortgage: $0
Rent: $0
Parking: Included
Maintenance: Covered by management (sorta).. but then again we won the lawsuit and never have to pay them.... outsiders parking here, them renting out the underground storage areas and advertising in the community covers all expenses.
2011 Current going rate (we can get this in cash in 3 days if we put it up): $360k
But hey, buying property in China is "stupid" I guess. With savings earning us more than enough to live on, we have a savings rate of around 110% now, all of it being dumped into more investments that turn even more of a profit.
I used to be saddled with debt in the us and living more or less like shit... even so, i'd cut out all the extras and manage a 60% savings rate. Americans, by large live far beyond their means and are the most wasteful I have ever seen. Stop paying for pointless "services", stop pissing away $5 on a fucking cup of coffee, fuck name brands, buy cheap or buy quality. Shit breaks? Fix it. Cant fix it? Repurpose it until every single ounce of value has been extracted from it and then sell the scraps to a recycler. If a debt starts demanding more than 10% interest, STOP PISSING AWAY YOUR MONEY ON REPAYMENTS. This shit is not hard to do, you are just lazy as all hell.
As far as housing goes in the US, you rent whether you know it or not. Property taxes = rent. You don't "own" shit. Over here, you pay in cash 100% for a house and that's it, no more taxes on it period. Lose your job? Economy goes to shit? Just turn off the AC, use less lights, wash clothes by hand and your utility bills will be about $4 a month. Go to the local market for food and you can live stupidly healthy and well for around $3 a day for two people. Phone bills? Prepay internet for the entire year and they'll fucking give you 600 minutes a month of free calls split between the house phone and up to 3 linked cell phones (with calls made between the 4 numbers absolutely free). Cable bill? It's $2 a month.
If where you live does not allow you to realistically save and cut spending by drastic amounts without being homeless, you are probably living in the wrong fucking place... move.
I guess it is all in how you look at it. If you rent you have to make a monthly payment and if you buy you have to make a monthly payment. Either way you have to fork over some cash to live somewhere.
I prefer to buy if that's what you want to call it...because I don't have a landlord breathing down my back if I miss a payment.
I don't have a landlord on my back telling me what I can and can't do on the property. It's difficult to find a landlord that will let you have chickens, meat rabbits and tear up have the yard for a garden.
My payment stays the same every month and at the end of the year the bank can't go up on it because it's a fixed rate. Yes property taxes mostly do go up(LAST YEAR THEY WENT DOWN BUT THIS YEAR THEY WENT UP AGAIN)
If you think a landlord will not pass on the increase in property tax to you in the form of increase rent...think again.
So for me it's much better "buying" my house. I didn't buy it as an investment but as a place to live.
Why not buy and then rent it to yourself? Then you can rent-to-own it back.
I'll bet you never even thought of that.
the government is doing that right now, paying interest on their money that they borrow.
Then I take it back. They DID think of that.
You are in the matrix, everything is an illusion
bottom line, yup. once that's truly learned, everything gets more entertaining. . .
It kills me that Shakespeare nailed it a few centuries ago and everyone has heard the quote but just brushes it aside as some boring thing that the had to memorize in high school.
All the world's a stage and all the men & women, merely players.
the residential real estate market is so polluted with unsustainable direct & indirect subsidy and vacant/upside down inventory, it's hard to make sense where rent & purchase price discovery will end up. eventually, there has to be some form of correlation, but i doubt we reach that point orderly.
I think, objectively, it's safe to say that housing prices are not set to increase. The only risk is to the downside. Further, the term of obligation in a residential lease is not likely to exceed one year and may even be less. In other words, if the prices remain remotely the same, renting carries with it implied value in that you may transition to a purchase at a later date (after the flood), whereas with home ownership, you have already bitten the weenie.
Does this report factor in more job losses and higher unemployment causing more home foreclosures and down pressure on prices? Does it address declining real wages making more people unable to buy a home?
These are the two reasons people avoid home buying. Falling home prices and inability to get financing.
They're probably not even addressed in this report.
I'm not going to bother reading it to find out. Because this report doesn't matter. I'm not buying a home when prices are falling another 30% - 50% before the market bottoms out.
Yes ... bottoms ... (avatar drooling) ...
-- National Association of Realtors™ ®
-- National Mortgage Brokers Association™ ®
-- The Bernank™ ®
/SARC-A-LARK/
and stock...
market up...BUY BUY BUY...
market down... BUY BUY BUY...
any salesman has to SELL SELL SELL... OR STARVE STARVE STARVE...
Owning your home is a great idea if you are creating productive value on your property, i.e. alternate energy, livestock infrastructure, orchard, greenhouse, etc. Even better if there is extra space to build for family and friends (or to rent out). Running a business from your residence is also a good way to get some "economy of ownership."
If you are a wage serf with no plans to make your property productive, I say don't bother buying. In a city especially owning your home might be a financial black hole with little or no other benefits besides getting to decide what color granite countertops to get. And it will be a lot harder to leave when the riots start.
Owning one's house is a great idea if they pay cash for it (or better yet, build it themselves in a competent manner with quality) and view it as a lifestyle & health decision, rather than an investment decision, and they also are prepared and equipped to deal with the property taxes and maintenance.
Repudiate the debt. People are now brainwashed into thinking it's a great time to buy JUST because mortgage rates are low. If they bothered to amortize the mortgage, they'd still find they're paying 2.5 to 3.5x times the mortgage amount back, once interest is included, on an even low rate mortgage, and this doesn't include prop taxes or other expenses.
Yes, 2.5 to 3.5x times the mortgage amount, but think about how much the opportunity loss there is for the lender in the real vs nominal sense. No wonder compound interest is necessary in a fiat system!
The article doesn't account for the fact that property values are going to fall another 50% at minimum. In the housing run up, people forgot that owning a house actually costs money..it is consumption: Repairs, taxes, etc. Also, government subsidized loans are coming to an end. Add on the fact that right now the US is exporting dollars and importing goods, fueling a service based economy and the dollar system is ending which means that the US will actually have to make stuff again and the people will become much much poorer in the transition. Housing is waayyy overbuilt which will be exacerbated by people moving in together because when it comes down to eating or living in a nice place..they will choose food. Bottom line is buying a house = buying a rapidly depreciating asset..kind of like buying a boat but worse because a house doesn't move. Now, no money down and locking in a low interest rate over 30 years means that the payment will likely be wiped away by inflation, but then you're committing yourself to stay in the property at the beginning. My vote = rent and buy silver.
I once sold insurance... they told me, sell two universal life policies a week and you will live like a king... problem was these were all front loaded and the smart thing to do would be for people to buy term insurance and invest the balance they saved from the high UL premium in a mutual fund or whatever... But I needed to sell 10 of these a week to make the same commission...
It's the same thing here... the balance you save from the Premium option (a home) is invested, which is way more valuable over time, because you still filled your need (a roof)... seems so simple...
you are right on the money...
House, Job, Spouse, Family, Relationships: Committing to anything for 30 years is pretty tough these days when Wall Street has defined the long term to be 90 days.
In Houston, both options suck. Absurdly high property taxes hurt homeowners and renters alike since property owners are forced to pass tax increases on to renters. Despite this, the city has stil somehow managed to get itself info financial trouble. Our current Mayor, to her credit, is trying to address this, but she's been dealt a lousy hand and has few choices at this point, all of them unpopular. I, for one, wish everyone would stop assuming that because you own property, you have extra cash to throw around and that you should fund the local schools. I have neither extra cash nor children.
California would collapse into a black hole (and take America with it) if someone ever repealed proposition 13.
http://en.wikipedia.org/wiki/California_Proposition_13_%281978%29
Sorry, the back-of-the-envelope seems like a pretty good calculation to me. If monthly interest on the note plus maintenance cost and taxes less savings from the mortgage interest deduction is more than you would be willing to pay to rent the place, then IMHO it's a bad deal.
Many here have mentioned good, relevant factors to be considered beyond this first-order calculation, but in NYC even this little exercise shows that purchase prices (+ maintenance for condos) are so hopelessly out of whack that there's no point in continuing unless you believe that NYC real estate will appreciate at a high enough rate (with a high enough likelihood) to justify paying the difference.
i currently live in a great place to buy a house but it is being assaulted on all fronts to destroy this cheap place to live. Why? well we aint to friendly to welfare cows. A few years ago the Fed and state decided to tell our community that they would take away all federal and state funding for our school sytem unless we allowed for an area of low income housing. Losing that money would have meant increasing the tax burden substantially. so they took and old crappy apartment building and made it low in come housing and two cops sit outside it all the time.
would you believe that i pay about $100 a month total for water, sewer, trash, and electricity. three years ago my bill was always less than $75 a month but we had the EPA interfere with our charges for water and power. They claimed our city charged us too little and it wasn't fair since water should cost between 3%and5% of the average income and ours cost .8%. we were forced to double our water rate and the state told us we should be happy because we still pay the least in the state. If we didn't raise our water rate the EPA was going to levy charges against us. THANKYOU OBAMA.
Our property taxes were set to the state constitutional cap of 2% of the property value but that was just changed. Instead of changing the state constitution the great leaders of Ohio decided that they would allow riders to be attached to property taxes in the form of levys a long time ago. our school system went in the red the first time last year so a levy was passed by a little over 50% of the vote and my taxes went up $500. I still only pay $2000 a year on a $150k house but it is still not fair.
I still pay less than almost anyone else who lives in a city but my base costs have jumped by 25% in the past year. if my city can make it charging so little why must the government step in and force increases becuase they deem it unfair to others.
I wish Obama would come here on his bus tour but he wouldn't dare. He wouldn't make it out of the city. 40% of our electorate identifies themselves as independant but that is only because nealry 90% of that identifies themselves as libertarian.
Do you know anyone who went bankrupt because he rented an apartment? Enough said.
people mainly go bankrupt for poor money handling skills. An apartment has no privacy. I can walk away from my house just as you can walk away from your apartment. If you life for your credit rating then I guess that's just as much a slave as buying a house.
Very poor point. My parents already threw out plenty of deadbeat squatters who decided to stop paying rent. Presumabely, cause they were bankrupt, and just lied on their reference forms given when renting the places. Granted, they lived scot-free for 2mo cause the rental board in QC is a POS and it takes forever to get anything done. "Renters rights" or whatever.
Interesting comments, all. I own my home. I live in proverbial BFE (Bum F$ck Egypt, aka the sticks, aka nowhere, etc. etc.). My taxes are $360/yr (little less actually, rounded up) or $30/mo. My power runs $50/mo (I use grid, solar, wood/oil/coal for heat; no need for A/C, temperate enough in the summer with fans). Water is from a well, just replaced my septic myself. For me, it's a great deal. BUT.... I bought at a fantastic price, put a SH!TLOAD of labor into repairs and did everything myself to bring it to what it is today. If I had to do it over today it would cost considerably more, the taxes would no longer be grandfathered at the rate I pay and zoning/codes would kill me on what I can now legally do (thanks to the county adopting what the closest city does for the benefit of the welfare potatos). Would I do it over starting today? Not a chance, wouldn't be remotely close to where I currently am. I would rent.
I really like this graphic/calculator from the NYT;
http://www.nytimes.com/interactive/business/buy-rent-calculator.html
still doesnt take into account work done (pay yourself a "wage" and enter that) or exit selling price (because you dont know) or interest rates in 30 yrs, thats 2041 to you.
I like the calculator. Thanks
or tax write off for mortgage interest and property taxes. Or if you own and live there x years and then move out and buy another house, but keep your old house and turn it into a rental.
OT, but banking advice sought nonetheless: Should I sell my 241k mcmansion for 170k (current offer) to pay off 130k in home equity line at BAC and then go rent? Or should i keep paying 7k property tax + 2k insurance and stay put rent free (home was purchased with cash)?
I'm wondering if it's good to be holding mcmansion real estate through the next 10 years, or better to stay nimble and ready to leave town when SHTF.
I know this ain't no personal finance advice page (we can just fight if that's better), but I'm eager for your thoughts.
If the banks are so sloppy, can i walk away from the BAC home equity loan (currently paying only 2.75%)?
Or can i use the remaining home equity to take out a second mortgage--to buy more metal of course?
Do banks give 2nd mortgages these days?
Ich bin ein Hank Paulson.
McMansion = Bad target. Indefensible and a Albatross on you.
I'm not sure on most of it, but on the likelihood of getting out of a loan without financial hardship, I'd say your odds are slim unless you're willing to give that impression... bear in mind that you'll eat a portion of the loan forgiveness via tax. Now, you may have incredible luck at ducking a mortgage... but, the note is a different story...
Much of your question boils down to a timing game... if you can accept that you're not omniscient and are throwing darts, I would do whatever makes you feel the most comfortable... obviously more knowledge/input tends to lead to better ability to make correct decisions, but there are too many variables in this one.
You might also factor in a guestimate as to various scenarios where your house loses 50%, 40%, 30%, 20%, and 10% of its value over X years... will help with determining the value of renting.
Free and clear on mine. Waiting to buy my first rental unit so somebody else can pay my property taxes and then some. Cash flow positive on 20% down is possible in my area. Haven't seen that in 10 years. Still waiting for a little more margin of safety. Maybe start low balling 20% below asking price...
good thinking.
I am in same boat as you. Just ahead of you some, already have one rental and it's almost paid off. Looking to have the income from it pay my utilites and taxes on my house so basically live free and clear in it. Currently looking at getting another rental probably this next year which will be about the time the squirrels that didn't save start running out of money and need to dump their condos and townhouses. I go for townhouses and condos that way I don't have to deal with as much maint. as you would on house rentals.
I like tents better.
What's up with the enormous yet hurtling-toward-zero job growth numbers? Boston from 86% in Jan to 20% now?
The BLS numbers here (http://www.bls.gov/ro1/cesbos.pdf) covering 2004-2011 swing from -5% to +2%. I know those might be off, but what does 86% mean? Sounds like total crap.
I didn't click through to the source data since "searching for jobs" is no doubt invisi-flagged here in my cube. I guess they're counting internet job listings posted? This would explain the trend too, if we assume that companies tend to open their reqs in Jan and then start phasing out the advertisements as they hire.
The decision on whether to rent or buy is more complicated than simply comparing the two costs! Sure, on the face of it, I might be able to get a monthly mortgage payment that matches or is slightly lower than my monthly rent. But if I rent, I'm not exposed to the ongoing crash in housing prices. I don't end up underwater on a mortgage. Because make no mistake, housing prices have not bottomed. With unemployment climbing (likely at an ever increasing rate given all of the horrendous economic news coming out daily) and wages continuing to fall (because everyone's becoming a burger-flipper now), there is no way that housing prices have stabilized. In our current environment, it is far better to pay a monthly rent than to whip your balls out and take out a mortgage.