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Is it better to buy or rent?

nytimes.com — Compare the cost of buying and renting equivalent homes.

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  • kevyn, on 10/12/2007, -0/+29really nice website....but the cost of housing in the UK is so sky high at the moment that i'll be renting for some time yet.
    • roosterjm2k2, on 10/12/2007, -29/+13Its simple math, and has nothing to do with price.

      If you're going to be around for a while, buying is better, if you just need a place for a couple of years, renting is better.

      Renting is throwing money away with no return...buying builds equity...its a no brainer, as long as you're going to be around for a while.
    • Silencer7, on 10/12/2007, -2/+24Yeah, you might want to hold off on that in the US too...
      http://www.boingboing.net/2007/04/04/us_housing_prices_gr.html
      "SpeculativeBubble have turned American housing prices from 1890 to the present day into a rollercoaster design using RollerCoaster Tycoon. Watching the video made me feel poor."
    • Fission, on 10/12/2007, -4/+88Being a senior loan officer in the mortgage industry for a long time, I have a lot of knowledge in this field. Not trying to sound cocky -- but it is my career. Anyway, there are so many different factors that you have to account for, a website will never be able to tell you what is better. You have to figure that out yourself on a huge number of factors. Here are some, just for example.

      -Do you move a lot? If so you may want to rent instead of having to buy over and over.
      -Do you have enough money for a down payment on a house?
      -Can you afford a mortgage payment? As of right now, you can't buy a decent home in most of Massachusetts (my state) for under $250,000. That mortgage payment including taxes + insurance will be substantially higher than renting.
      -Do you need the space that a house can give you?
      -Do you want to be secure when you retire after you pay off the mortgage and have absolutely almost no payment (except for taxes + insurance)?
      -Do you want to try to sell the property and make a profit?
      -Do you want something for your children to have when you pass?
      -Do you have the credit to justify a payment that you can afford for the house?
      -With a depreciating market, do you want to invest in a house that may lose $50,000 in value in the near future?

      The list can go on and on for a long time. There is no magic person, program, or site to tell you which is better for you. It's all very unique for each individual.
    • mobislink, on 10/12/2007, -0/+6Rosterjm
      I'm not sure if it is that simple. Say your rent now is 2K a month. With that you are able to dump $750 a month into an ING savings earning something like 4.35% interest. So your total monthly combined cost is $2750

      A comparable home where I live is ~400K with property taxes being around 10K a year. Add a $500 maintenance charge if it is a town house. If you put 10% down you have finance 360K, You mortgage is ~$2200 a month. Add $833 for taxes. Now you at $2833 a month. Say the annual appreciation is 2%. I know the 2% appreciation on $400K is more on than the 4.35% in the ING account but that 2% is not garenteed. It get more complicated when every house on the market is over priced and property taxes are through the roof.
    • Cwo655321, on 10/12/2007, -3/+23what about buying or renting your parents basement?
    • z0iid, on 10/12/2007, -1/+11sorry to abuse the first comment. (ducks). Change the down payment amount to ZERO which is what a LARGE percentage of first time home buyers will be at or DID do when they bought their house. This drastically affects when buying is better than renting. Also, in today's market.... you could rent the same amount of space for less than the cost of the mortgage. Also, this doesn't account for the fact that MOST of all buyers have adjustable rate mortgages, and so the rate percentages are likely to go up.

      Now on the OTHER side that this chart doesn't show you - the tax write off benefit you get. Which on 220k @ 6.25% (assuming 100% home loan) is approx $13,750 LESS that you don't have to pay taxes on your income. Example: You make 75k/yr (about what you should be making - or more to own a 220k house). You are in the 28% tax bracket. Well, now you only pay taxes on $61,250. This puts you in the 25% tax bracket. Guess what - instead having a net tax bill (assuming you aren't W2'd) of $21,000 - you know have a net tax bill of $15,312.50. So, in effect, you just added $5,687.50 to your income - that you WOULDN'T have had, if you had been renting. Yes, this is best case scenario, assuming that by writing off your interest is the only way to take you down a tax bracket. But you get the picture.

      Either way, this is just a basic picture, there are more variables to consider than just a simple chart. But basically, if you don't plan on staying in one home for an extended period of time - it probably isn't a good time PERSONALLY for you to buy.

      Other things to consider - either you believe in general, the market will appreciate over 30 years (as it has over the last 30 years, and the 30 years before that - and assuming you stay in the home for 30 years), or you believe that the world economy is too fragile, and we are all doomed to die due to global warming..... make what you want of it.
    • Y0tsuya, on 10/12/2007, -0/+4In the short term, 3-5 years, housing prices are not going anywhere. In fact, all indicators are pointing firmly in the downward direction. Anyone who believes "subprime is contained" is a fool and deserves to lose his money. Also, the equity building part really depends on the affordability of housing. In unaffordable bubble areas, people stretch to buy their house, which means interest-only or option-ARM. That means their principal not only do not decrease, but sometimes increases. That's not how you build equity and pay off your house.

      The old realtor line of housing only goes up and it's better to buy and own, only applies when the market is normal. The current market is anything but.
    • hdtvdust, on 10/12/2007, -4/+1z0iid is right. I know someone outside Philadeplhia who needed a place that she could keep her two dogs. She couldn't get any to rent for anything decent. She then stumbled on a place that at first was offering to rent to her for $1000 a month. After some time, they offered to SELL the house to her. She researched it, and with no down payment (two mortgages,) she is not paying $850 a month.

      So, she is paying $150 less per month and is not throwing that money away every month like she would if she rented. She IS getting screwed on her mortgage rates, as expected for people paying no money down. But still, it comes to less than what the previous owners were first asking to rent the place for. So, unless she has any major repairs to do, she is comng out ahead every single month.
    • jasontm1, on 10/12/2007, -1/+5@hdtvdust

      I think your reply is a perfect example of how people over simplify the situations and use incomplete math to analyze a situation. It isn't always as cut and dry as you are describing and other posters seem to be more on track.

      To illustrate my point, lets assume that due to family emergency/job/etc your friend needs to sell this home next year and relocate. This is when the items you left out such as her closing costs which have been rolled into the mortgage, costs to sell the home, and a high likelihood that she might not be able to sell the home for what she payed for it. Your friend will be left coming to the closing table with her checkbook in order to get out of her upside down situation. In this circumstance she would have been far better off by renting.

      Obviously this can go both ways. If she stays in the house for a long period of time she is more likely to have payed down the mortgage and in combination with some long term appreciation(getting beyond the coming/current market corrections) then she can sell the home and walk away with some of that equity. Better still she might just live in this home the rest of her life and actually have it payed off in 15-30 years so that she goes into her twilight years only worried about property taxes/maintenance/insurance.

      I'm not trying to bash you here. I am just pointing out that its not as basic as the few figures you put into the equation.
    • prockcore, on 10/12/2007, -3/+3The mortgage payment will almost always be less than renting the same house, unless the price of that house has gone up considerably since it was last refinanced. I'd be dumb as hell to rent a house to someone for less than what it costs me.
    • sammyc53, on 10/12/2007, -2/+4"A comparable home where I live is ~400K with property taxes being around 10K a year"

      You should move.
    • Robotsu, on 10/12/2007, -0/+15Not to get too off-topic, but all discussions of buy/renting aside: that is one sweet interactive graph.
    • hdtvdust, on 10/12/2007, -3/+2jasontm1..First, anyone who has made themselves valuable to an employer doesn't have to worry about moving any time soon. Second, no matter what, her monthly bills are less than they would have been. So, not only has she saved $150 a month for the last 18 months, but she has equity that she wouldn't have had. WORST case scenario she could sell it for a loss (though it is valued at about $10,000 more than she paid for it right now) and break even considering the money she saved per month plus the equity she has built, which obviously is not a big percentage given a 30 year mortgage.. This is not an expensive house we are talking about. It is an $85000 (now $94,500) house. So it is not going to drop that much

      Sure, you can choose to live being afraid of worst case scenario's happening. But in the long run, you are ***** yourself big time. And if you can buy a house for less than it would cost per month to rent it, and you choose not to because there is a teeny tiny chance you may have family emergencies (and really...what kind of emergency forces you to move?) or may lose a job (and even if she did, she has to live SOMEWHERE while she gets another one, so why not there? She is a grown woman for crying out loud. She is not going to move home with mommy and daddy) you are nuts.

      Also...did I forget to point out how unlike her rent, her mortage will not increase every single year. Even more savings.

      Obviously she would not have done it if there was ANY significant chance that she was going to have to move within a year. But even by now, after just a year and a half, she will make out better. And she has no plans to move any time soon. In fact, she got a new job recently. Not because she lost her previous one. She got her dream job, with a 50% pay raise. And the location is where most her her career jobs would be. She the chances of her having to move are tiny.
    • sonycam, on 10/12/2007, -0/+2Yep, average house price in UK right now is £185,000 ($365,000). For a decent house though, you're looking at about double that. Of course this is good news for people who purchased their house 15 years ago and have seen the price increase by 900% or something crazy like that.
    • brundlefly76, on 10/12/2007, -1/+1@Fission

      Great list, totally illustrates how narrow this article is - I'm really surprised NYT titled this article 'Is It *better*', because what they are calculating is which is *cheaper*. Better is completely subjective, and no one should ever take anyones advice regarding which one is absolutely *better* - its a very personal and detailed decision.

    • aussieNickuss, on 10/12/2007, -0/+2Other matters aside.....its good to see useful, informative and intelligent comments on a digg post for a change.
    • JohnGalt01, on 10/12/2007, -0/+1@roosterjm2k2

      Buying only builds equity if the price when you sell is actually more than when you bought. In this speculative real-estate market, that is not a given.
    • intense321, on 10/12/2007, -2/+1@Fission

      You may be a senior loan officer, but the only thing I agree with in your post is that it is very individualized for each person. None of your criteria apply in certain situations. For example, I have a good friend who is a billionaire. He rents (a multimillion dollar house).

      1. Does he move around a lot? No.
      2. Does he have enough money for a downpayment? Yes.
      3. Can he afford a mortgage payment? Yes.
      4. Does he need the space that a house can give you? No. He lives by himself, is not married and has no children, but rents a 20,000 square foot house.
      5. Does he want to be secure during retirement after he pays off the mortgage and have almost no payment? He's already retired.
      6. Do you want to try to sell the property and make a profit? No. He will never sell it. He plans on dying in it.
      7. Do you want something for your children to have when you pass? No children. Doesn't care about passing it on to anybody.
      8. Do you have the credit to justify a payment that you can afford for the house? Yes.
      9. With a depreciating market, do you want to invest in a house that may lose $50,000 in value in the near future? No.

      Looking at those answers, it should be a no-brainer. He should buy a house. Why doesn't he? Because he doesn't want to own it. He has nobody to give it to and doesn't mind just paying some rent to take care of everything in the house. He never has to buy a hot water heater, or any of that stuff. It's all taken care of for him. He doesn't build equity because he doesn't care about equity. Makes sense to me.
    • brundlefly76, on 10/12/2007, -0/+3@intense321

      You definitely get the ***** post of the week award.
      Seriously - NO ONE on this list cares that you have a billionaire friend, regardless of how much you want an excuse to write about him.

      If you said you agreed with him that the decision is individualized for each person, then you agree with him, period.

      He lists some excellent questions for the average person to help make an informed decision one way or another, then carefully footnotes that the note is neither all-inclusive or applies to everyone.

      Welcome to blockworld.

    • brainScan, on 10/12/2007, -0/+1@z0lid: "this chart doesn't show you - the tax write off benefit you get"

      Actually, it does. According to the Methodology link on the chart "The interest part of the mortgage payment... [is] tax deductible. The resulting tax savings is subtracted from the operating costs."

      Furthermore, your math was wrong. Even though I don't own a house (I used to own, now I rent), I still get a deduction, called the standard deduction. The standard deduction was $10,300 this year. When I owned, my mortgage interest and principal were so low, that I didn't get much more off my taxes by itemizing than by going with the standard deduction. And this was when I just bought the house, meaning that the amount of mortgage interest I was paying each year, and the corresponding deduction, would only go down from there. Furthermore, I was only getting back about 25% of the money that I was paying to the bank in interest... well, 25% of the small portion that wasn't already covered by the standard deduction. There's no way that it amounted to anywhere near $5687.50.... More like $56.87.

      @Silencer7
      I loved the roller coaster video link. Precisely why I didn't buy another house when I moved two years ago. No way was I going to be the sucker buying a house right right before the inevitable 100mph death-defying drop!!!
    • brainScan, on 10/12/2007, -0/+1@prockcore: "The mortgage payment will almost always be less than renting the same house"

      Your statement is too simple. Let me correct it. The mortgage payment + TAXES + MAINTENANCE/REPAIRS + INSURANCE + CLOSING COSTS, which are based on today's selling price, will not always be more than the rent for the same house, which is based on the selling price when the landlord purchased it.

      "Huh?" you ask. Five years ago, my landlord bought a condo for her daughter to attend college. Five years later, I now rent that condo. I am paying rent based on the amount that she owes on her five-year-old mortgage. Nearly identical condos are for sale in our complex, at a much higher price than 5 years ago. (An aside: They've all been sitting on the market unsold for months! Their owners are still paying mortgages on them, even though they've long since moved out). The rent that I pay is $150 LESS than the monthly mortgage payment that I would need to pay if I bought one of those units. That mortgage payment doesn't even include taxes, maintenance, insurance, or other costs.

      In the meantime, I'm taking that extra money that I'm saving by renting and I'm putting extra into my retirement account. Even better, I'm doing this while my landlord is fixing the condo (replaced carpet, washer, dryer, and microwave), and while it's my landlord's equity that is at risk of the declining real estate market! All in all, renting was the best decision for me here and now.
    • aabjora, on 10/27/2008, -0/+0I've heard about a British couple that has been living all their live in hotels... They consider this way to be cheaper than involving themselves into a mess of mortgage payments.

      my space:
      http://www.mortgagerefinancingloanz.com/
  • schlurp, on 10/12/2007, -8/+22Damn, I wish I had known about this site a year ago when I was having discussions with retards all the time who were insisting that buying is always better.
    • bob_the_alien, on 10/12/2007, -9/+7Buying can always be better than renting, However it's all in how you do it. you can buy one that needs fixing and live in it while your fixing it up, in whatever your spare time is, and a good majority of the time, even in some larger cities, your only talking 30 to 50 g's for these homes, and once you live there for 4 or 5 years and spend a marginal amount of cash over those year reparing it, especially if you do the labor yourself, if you go to sell, you will come out making a good profit for yourself.

      It's all in how what you buy and how you deal with it.
    • futureb, on 10/12/2007, -1/+5wow. where are these 30-50K dollar houses of which you speak?

      the major factor here is appreciation. if you figure the house will appreciate at 5% annually, the renting makes sense even in the short term (5 yrs. or less). but consider that last year housing prices generally fell on average by about 1% or less. And prices will continue to drop for the next few years...

      it just doesn't make sense to buy right now. at least for another year or two.
    • h2d2, on 10/12/2007, -0/+8Yes where are these 30-50K houses near NYC... I'll take two please.
    • hdtvdust, on 10/12/2007, -1/+6Forget NY City. Wehre are these $40,000 homes ANYWHERE? I don't think the article is talking about mobile homes.
    • AxeSwinger, on 10/12/2007, -4/+2Buying is always better than renting if:
      You have a competitive fixed interest rate.
      Your local market is historically 50 years shows decent appreciation year over year. Decent would be 3%-5% or really anything that out paces inflation plus a little more for real equity.

      It's such a personal decision you can't speak in absolutes but the two criteria above are part of what I used to purchase our homes.

    • AxeSwinger, on 10/12/2007, -0/+4Bob you're high. In San Jose you cant walk into any single family home, thats not a mobile home for less than 350k and that's a structural tear down or in a neighborhood that will have no true resale value because of the crime rates so your sweat will not provide the type of returns you would typically expect.
    • bob_the_alien, on 10/12/2007, -5/+4well, maybe your all right, however, I've bought homes around Cincinati, Indianapolis, Louisville, and then many southern area's of Kentucky, for around these prices, The homes were structurally sound, and where not really in bad neighborhoods
      and I doubled sometimes tripled my investment on them.
      it's not just about going to realitors, there are also auctions, where the prices are vastly cheaper, I can't speak for the rest of the country, but I've been doing this for awhile, in my area, and I know it can be done.

      Average price for a home in the town I live in is about 120k, and here I can buy a home that I can sell for 120 for about 20k, and it only needs maybe 10 to 20 worth or work to get it to sell for that. Houses that look like they are falling down, sometimes are really not, but the average home buyer doesn't realize that, cuz they are only looking for a home, once a home has been on the market for 6 months to a year, you'd be surprised what a owner is sometimes will to accept for it.
    • AxeSwinger, on 10/12/2007, -0/+5I don't doubt that your numbers are accurate for your region but as you know it's all about location, location, location. The major urban areas are highly competitive because of proximity of cultural events, high paying jobs, and limited available land.

      I know in the SF bay area most land is already developed but people are willing to pay an arm and a leg because they're tired of commuting 100 miles one way from Stockton or Modesto.
    • Sippi, on 10/12/2007, -0/+2The house you are speaking of is infact my house!

      Mississippi
      $56,000 - 1050 sqft (3 bedroom,1 bath, 1 acre yard)

      Most people on Digg, love to bash the south for being backwater hillbillies. At least you can still afford to buy a house, send your kids to school and not worry about how you will pay for it all. Sure my house is not new, nor is it something you will see on the golf course, but my house payment is $473 a month for 15 years.

      Cheaper than renting and the money/improvements I put into the house I get back when I sell it.
  • aroundtheblock, on 11/06/2008, -9/+19hmm.. equity?... no equity?... equity?... no equity?...

    tough decision
    • johngf2, on 10/12/2007, -1/+5equity? cash in the bank? equity? cash in the bank? I pay 25% more to own a place 1 block away from my previous rental.

      I own, because I was tired of moving, not for an investment.
    • Thecal, on 10/12/2007, -0/+4So you could a. get equity in an "asset" that is depreciating and has annual property taxes or b. get equity in the stock market with much lower costs and a higher return rate. Tough decision.
    • bg_27, on 10/12/2007, -2/+1Equity and wealth is FAR more important than cash in the bank. You can't use your cash in the bank as security for a loan for say more investments, etc.
      So investing say $5000 that you have saved up in the bank by renting over a couple years, or borrowing $50,000 secured against your house as it appreciated over the same couple years (if it does...), opens up the ability to do more with your money, 10% of $50,000 is far greater than 10% of $5000. They old rule still applied, it takes money to make money.
    • sinurgy, on 10/12/2007, -0/+2More like negative equity? no negative equity?

      You buy a house now for $300,000, don't at all be surprised if this time next year it's worth $200,000. Buying a house right now is just foolish unless you seriously won't be moving for a decade or more!!!
  • Nudar, on 10/12/2007, -11/+25To sum it up, if you aren't going to move for 11 years then buy. If you will move more frequently then that, rent.
    • CannedMango, on 10/12/2007, -3/+18Don't know why you're getting dugg down. Diggers here seem to ignore the fact that moving from place to place is a very attractive thing for many people (myself included). I'd love to buy a home and watch my money grow, but who wants to sit in one place for their whole life to do it? Frankly, if I had to live in the same home for 20 years, I'd probably end up killing myself.
    • macweirdo42, on 10/12/2007, -1/+10Agreed. For myself, I'm not yet at a stage in life where I can say "I'm going to be living here for the next 20 years." I mean, hell, half the time I have no idea where I'll be next year, so why the hell would I buy?
    • spudnic, on 10/12/2007, -2/+2You don't have to live in it for that time, if you've got the money (or can borrow it) you could rent out your old house, have the extra income from that, and buy a second property.
    • HardwareLust, on 10/12/2007, -2/+2Doesn't necessarily have to be for 20 years. My house has appreciated $100k in the last 5 years. Now, we're going to take our $100k profit and move to where housing prices are 1/2 what they are here and do it all over again.
    • jlink7, on 10/12/2007, -0/+1There are also thousands of military personnel that are pretty much REQUIRED to move every three to four years. Now, while the military will pay for on-base or contracted-out off-base housing (the growing trend for military housing) not all military are married. Speaking from strictly the Air Force perspective (not having sufficient knowledge of the other services housing methods) unless you're an E-1 to E-4, you're basically kicked off base if you are not married. I rent because I've done research and can better save my money renting a 2 bedroom apartment for less than my housing allowance than buying a house that would require payments of ~1.75-3x my housing allowance (depending on how nice the house is) that I would just be forced to sell when I moved again (or rent out).

      No thanks.
  • neeyo, on 10/12/2007, -9/+41My god the level of intelligence so far is appalling.

    If you rent a home you get a place to live, don't have to worry about maintenance, and don't take part of any appreciation (or loss) the property receives.

    If you BORROW money from a bank to buy property (a mortgage), you are still RENTING your money from the bank. The interest you pay is your rent. Up until 2005, price appreciation in real estate was all but guaranteed, but that is definitely not so today. Plus, it costs a _lot_ of money to go through all the hoops of purchasing a home, and then selling it again at the end. Everyone likes to pretend that mortgages and lawyers and title costs are free, and that they won't use a realtor to sell their property and will keep the commission in their pockets, but it just isn't so. Plus with home ownership comes real estate taxes that are due EVERY year, which is basically a fee that eats up your "profits."

    The idea that home ownership is the sole path to financial freedom is peddled by the ignorant.
    • je2i, on 10/12/2007, -8/+9You are deluding yourself if you believe that you aren't paying real estate taxes on a rental property. The taxes will be included in your rent payment, of course, but you are paying real estate taxes no matter where you live, be it in a rental or a home you are buying.
    • mrosson, on 10/12/2007, -4/+3A landlord isn't going to rent the property out unless it has a positive cash flow, meaning that your rent payment covers their mortgage (read: interest, and paying into THEIR equity), insurance, taxes, repairs (average costs over a long period of time), etc. They also benefit from appreciation over a long period of time. Something to think about...
    • jlink7, on 10/12/2007, -0/+5But do renters generally have to spend money fixing stuff up (if they didn't break it themselves)? Renting a lot of the time is also purchasing convenience. I don't have to worry about making improvements to my property as I don't really care about the appreciation value.
    • johngf2, on 10/12/2007, -0/+4@mrosson

      That is true however, his mortgage might be 10 years old, hundreds less than you are paying him, still much lower than you could buy for....that's the beauty of renting, lots of people keep rental properties for a long time, meaning you are essentially paying a price set years ago.

    • oogee, on 10/12/2007, -5/+2guys, think.

      when you buy you own something, when you rent you don't, it's as simple as that. here's what I'm doing: I bought a house and I'm making regular payments with almost no maintenance right now because the home is new. on top of that I'm making extra payments which is the equivalent of a tax-free investment compounded at the same rate as my mortgage rate. It's making money by avoiding the interest cost. granted, it's not money I can spend right now, but it means in ten years you'll be paying your rent and I'll have no cost besides property tax and maintenance (costs which as many have noted are built into the cost of your rent)
      In my particular situation, paying an extra $35000 towards my mortgage has saved me $56 000 (160% return on my investment) over the life of my mortgage and now every payment I make is more principle and less interest.
      You can say that renting is better in the short term, but you can't say that owning a home is not a great investment. Renting isn't any kind of investment at all.
    • radu79, on 10/12/2007, -0/+3But the owner has multiple families in a house, so those taxes are divided between them.
      I pay 500/month where I live now (rent).
      If I owned the house, I'd pay about 3.5K taxes a year, so that's ~300 a month. Then when you add the insurance, fixing up thing and so on, you get to about 400 a month. So the owner makes maybe 100 a month from me, which is not much at all.
    • neeyo, on 10/12/2007, -1/+7Let me clear up my point.

      In the long term it will always be better to own a home than rent one. But that will get flipped on it's head for someone that knows they will be moving in the next 3 - 5 years.

      Factor in the 0% appreciation I expect my area (Phoenix) for the next 18 months and now renting doesn't feel so bad. I saved up a lot of cash over the past two years to buy a home because I felt the rush of prices would just exceed anything I could ever afford. Now that prices are stagnant here and actually fell 2.5% over the last year, I don't mind renting at all right now until I can find the best opportunity that fits me.

      But the general idea of a home as an investment is misplaced. It will only work as an investment if your home rises and all other homes don't. Think of it this way: if your home rose in value 100% over the next 10 years ( so you could sell it for double what you paid for it when the year 2017 comes around ), but EVERY OTHER HOME also costs double what it used to, how do you get your money? How do you cash in your investment? You don't. You have to live somewhere. Would you sell your home and then take your cash and live on the street? No. You would have to sell your home and move into a cheaper home in order to cash in on your perceived gain. But even that cheaper, beater home has gone up in value also.

      Bottom line: Inflation's a bitch. When every home goes up in value, it's called inflation. Real estate agent's use the word appreciation, but, then again, they charge you 3% when you buy or sell a home.
    • revolved, on 10/12/2007, -0/+6Many people's responses to the rent vs. buy debate makes the assumption that the most important thing in life is money. Money sure is important. But if you think renting is just throwing your money away, you're missing something...

      I could never afford to buy the place that I live in. But for a reasonable amount of rent, I live in an amazing place that I really like. Its in a great neighborhood in a great city. I don't have to worry about a huge mortgage or any kind of repair or maintenance costs. And since I'm not strapped with a huge mortgage, I can use the money I save to buy the things I want and travel.

      To me, renting is an investment in my life right now, and gives me a lot of peace of mind.
    • oogee, on 10/12/2007, -1/+3@neeyo I guess I'll have to clear up my point too since I'm getting dugg down.

      I don't consider selling my home as the investment part of owning vs. buying. you're right about having to live somewhere. but doing things the way I'm doing it, owning a home is an investment in two big ways:
      1. paying extra money towards my mortgage in the early years is better than keeping it a savings account (@ about 0.1% interest) because I get a guaranteed return of whatever my mortgage rate is (5% right now) since I won't have to pay the interest cost on that money (goes straight to principle) and it's essentially a tax-free investment. Plus it's a zero risk kind of investment.
      2. When my mortgage is done I pay nothing and you're still paying rent. If I want to I can sell my house and move in next to you in your apartment and spend my days rolling around in piles of money I got selling my house for double what I paid for it (according to your example) and you'll still be paying rent and you'll never be able to get that rent money back.
    • sinurgy, on 10/12/2007, -0/+1@neeyo

      Phoenix area here as well and I can all but guarantee you it'll be much worse than %0 appreciation. I wouldn't be surprised to see close to %40 depreciation. The Phoenix market is a huge bubble right now. The market is flooded with houses, a big percentage of those houses are vacant (meaning there is no new buyer added to the market when it's sold) and the subprime woes have weakened what was already pathetically small buyer pool. I have access to ARMLS and it's not rare to see houses being reduced by $20,000 and they are still not selling. In fact in February roughly 48,000 houses were put on the market but only 4100 sold. Unless you get an absolutely smoking deal or plan on living in the house for AT LEAST a decade, you'd be foolish to buy a house right now!
    • dgulbran, on 10/12/2007, -0/+2"you BORROW money from a bank to buy property (a mortgage), you are still RENTING your money from the bank. The interest you pay is your rent."

      Yes, but everyone seems to be ignoring that you still build equity in the house (granted, not much at first). IF you can hold on to the house long term--not a year or two, more like 10-15, you *can* build substantial equity in the house. There are other things you can do to build equity faster, too (extra payments, payment acceleration, etc.)

      "The idea that home ownership is the sole path to financial freedom is peddled by the ignorant."

      Absolutely. Home ownership is *not* the *sole* path to financial freedom. But the *reality* is that it can be one of the best investments a person can make *IF* they do it for the right reasons and realize it's a _long term_ investment.

      It's very easy to say, "You can rent, and just invest the money you would have spent on a house in other vehicles" but I would be willing to bet that most renters *don't* invest that extra in other options--they spend it. The bottom line is that the article dugg was very overly simplistic in it's evaluation of renting vs. buying, and Fission is right: to really evaluate which is better for you is based on many, many factors unique to your situation and goals. Articles like that don't do people any more service than articles that say you should go out and buy a home no matter what.
  • rackersc, on 10/12/2007, -6/+1That is a GREAT article. I've been looking for something like that for a long time. Thanks!
  • FairlyStupid, on 10/12/2007, -4/+3It's a case-by-case basis thing.. lot of factors involved... too many to list here
  • ViRaZ, on 10/12/2007, -3/+2Should also depend on what the place you are buying or renting looks like, how big both are, and where you are located. The chart doesn't help that much.
  • AgentMull, on 10/12/2007, -3/+8I had fun just playing with the graph.
  • holyskeleton, on 10/12/2007, -7/+1pretty cool web page. not very useful though.
  • pickypg, on 10/12/2007, -2/+6If you're renting, then you are paying someone else's mortgage, or just paying someone else. Either way, you're paying for someone else's equity.

    If you're buying, then you are paying your own mortgage.

    Just because renting may be cheaper for some period of time does not mean that it is better than buying. Renting is rarely the better option, unless, as other posters have mentioned, you just need somewhere to stay short term.
  • 4Ajax, on 10/12/2007, -2/+10Neither is good, the best is to move in with the parents!
  • spudnic, on 10/12/2007, -2/+2There are situations when renting is better, but they're extremely rarely the best finacial choice.
    Even if at the end of it you sold your house - only kept the deposit - and gave the rest of the money away you could still end up paying less than if you had rented.
  • jcaino, on 10/12/2007, -6/+2buying just makes sense.

    especially if you are somewhat handy and shop around for house that needs some attention.

    even if it is just for a couple of years, you can't go wrong with buying a house.

    well, let me recant that and clear it up a bit - if you are wise, shop around, get input from other home owners and KNOW what you're getting into - you really can't go wrong with buying a house.

    i currently own a home - i've only been there about a year and i am planning on selling it to move closer to work. i bought the house for LESS than the assessment value of 86 grand (it's a 3br ranch in a great area - close enough to the city to allow a 15 minute travel time to downtown, but far enough away that it's in a suburban setting and do not have to pay city wage tax)

    i've since put in whole-house air (bought the unti and a-coil for COST), put in a new garage door, and refinished the wood floors (myself, of course)

    i've already been offered 115k for it. that's a 35k turn-around right there. minus 5k i've put into it - 30 grand in a year isn't bad at all. let me see you get that from a mutual fund.

    so what am i going to do now? i'm going to buy a house closer to downtown, closer to work that needs attention - in an area that has a GOOD rental rate. i'm pretty handy and am able to do roofing, windows, drywall, electrical, plumbing, kitchen and bath work. plus i've enough friends in the aforementioned areas that i can typically get 'hooked-up' with decent deals.

    i'll live there for a year or two while fixing the place up - i'll be able to pay CASH for the house and have instant equity. that will allow me to, when finished with the house, use that equity to purchase another property and rent the fixed-up house out. oh - and i'll be able to write off the upgrades, of course.

    sure, you have to be careful with whom you rent too, but there's a lot of people out there making money off this. in fact, there's friends of mine that have gotten to the point where sometimes they just buy a place because it's too good to pass up - and they can afford to now pay other people to do the rehab for them - simply from profit from one or 2 rental properties.

    if you've a good head on your shoulders and aren't afraid to do some work (and are in a decent area - i'm in pittsburgh and there are certainly better/busier markets out there) then you really can't go wrong with buying.
    • morningmatters, on 10/12/2007, -2/+4"30 grand in a year isn't bad at all. let me see you get that from a mutual fund."

      So, provided that you are able to sell the home at a profit of 30k with an initial investment of 86k. Thats about 36% return for the year. Nevermind some International funds with 40%+ growth a year, the DOW alone grew from around 10500 to 12500 in the last 6 months, which makes about 20% return in 6 months. Of course, this does not take into account the extra 3% broker fee you must pay when you sell your home vs 0.5% management fee for index funds.
  • morningmatters, on 10/12/2007, -0/+4Renting is not a bad option if there are better investment alternatives. Historically homes appreciate a lot slower than the stock market, so instead of putting down that $400k on your new home which appreciates less than 5% a year, you can actually make more if you rent and put the $400k into the stock market which historically grew at 8+%. From 2000 to 2005 real estate have been growing faster than the stock market, making it a great and relatively safe investment to buy a home. However that phase has come and gone, unless home values can grow again at 10+%, money is better invested elsewhere.
  • geronimo, on 10/12/2007, -1/+1Factor in the huge writeoff for a house. If you live in it, you can write off your interest payments, usually 90%+ of your monthly mortgage payment. And if it goes up in value great, if not, watch out below. It's more of an investment and investments can go either way. Plus you have full control, I don't like dealing with a landlord who doesn't care about fixing things right away. Other people might not care and prefer renting, whatever 'floats your boat' as they say.
    • neeyo, on 10/12/2007, -0/+2Your deductions would have to exceed the standard deduction to be usable (currently $5,500 for single, non head of household tax filers) which for a 6% mortgage would be about $92k. But, yet, anything in excess of that would be usable, but it won't be a truckload of cash arriving at your doorstep on tax day.

      And, yes, you deduct your interest paid off your taxes, but you're still losing the interest that you're paying in the first place. It would be much better to just not pay the interest in the first place. I don't mean renting, I just mean having your mortgage paid off.
    • geronimo, on 10/12/2007, -0/+1"And, yes, you deduct your interest paid off your taxes, but you're still losing the interest that you're paying in the first place. It would be much better to just not pay the interest in the first place. I don't mean renting, I just mean having your mortgage paid off."

      If I pay $2k in mortgage payments vs $2k in rent, then owning makes more sense since I can write off interest and I will be paying less per month after writeoffs are factored in. Since I already have a lot of writeoffs due to owning my own business, and I live in one of the most expensive city in the U.S., the writeoff is significant. Paying $1million for a house to own it outright isn't doable (yet) either. I think we can all agree that owning outright is the best solution over every other option.
  • jcaino, on 10/12/2007, -1/+2damnit, missed the editing window.

    if possible, go check the assessment value on the home/apartment you are renting.

    (for example, if you are in allegheny county in pennsylvania, go here: http://www2.county.allegheny.pa.us/RealEstate/Search.asp)

    now, take that assessment value (which is more or less what you can buy the place for, give or take some $) and figure out what a mortgage would be with say, 10-25% down. (if you cant afford to put 10% down, then you aren't even TRYING to save money)

    now figure that mortgage payment vs. what you are paying for rent. you bet your ass that in the majority of cases that the rent is going to be lower. even if you get your property taxes rolled into the mortgage.

    how do you think landlords come up with their rental prices? no one is going to charge you less than their mortgage is or would be! plus they want to make money on top of that to cover unforseen expenses for repairs, etc.

    if you are planning on being anywhere for a year or more - it just makes sense to buy.
  • Tourney3p0, on 10/12/2007, -4/+3To sum it up:

    If you hate your kids or are a nomad, rent. If you want to have something to show for your life, buy.
    • Thecal, on 10/12/2007, -0/+1What if I don't want to throw money away that could go to my kids because I don't plan on living in my current place for the 17 years it would take to make buying worth it?
    • Y0tsuya, on 10/12/2007, -1/+2If you like losing alot of money in he next few years, by all means buy now. I won't shed a tear for you. If you're into capital preservation, rent until housing prices return to historical sane levels and buy it cheap. I mean, who likes overpaying for stuff?

      BTW I own my house, but I don't believe it's worth anything near what Zillow says it's worth.
  • bassist, on 10/12/2007, -0/+2It depends on the market conditions at that time. For example, in most parts of Florida, California, Nevada and Detroit, if you're buying with the hope of selling and making profits within the next few years, you could be in for a tough ride. Buying a house is like investing in stocks. Overall, the stock market eventually goes up, but if you catch it on a downturn, of course you'll lose money in the short run!
    • Y0tsuya, on 10/12/2007, -0/+1In most urban/suburban market nowadays, unless you like buying high and selling low, stay the hell away from real estate. Assets are heading for a deflationary spiral.
  • Neiby, on 10/12/2007, -2/+13Buying obviously can make sense, but mortgages are a scam. Financial advisers act as if buying a home is a fantastic investment. Oh, really? If you buy a $200,000 house, you'll end up paying $600,000 by the time you're done. If you're lucky, your home might double in value in that time period. That means that you still overpaid for that "investment" by $200,000.

    The only people who benefit from that sort of mortgage is the bankers and mortgage companies.

    Mortgages are a scam. The entire process is a scam. The realtors make a percentage on the sale of your home and they don't do *****. They list your home, put up a sign, talk to a few people, and they end up taking 2.8% of your sale. The buyer's agent ends up taking another percentage just because they can. Throughout the process, you'll be paying outrageous fees for filing, document prep, etc. The two worst cons are appraisals and title insurance. You'll pay many hundreds of dollars for an appraisal. You know what most appraisers do? They drive by your house, maybe take a couple of pictures, and spend five minutes on the computer pulling up comparable home sales. That's it! Title insurance is a total scam, yet you have to pay it. Absolute *****.

    Then, if you owe more than 80% of the home's appraised value, you'll get nailed with private mortgage insurance. That's another way they jack up the cost of your mortgage and ensure that you don't pay your principal down too quickly. It has no legitimate purpose, but you have to pay it.

    So, if get a mortgage, know what you're getting into. The only good thing about buying is the equity. But really all that equity does is allow you to borrow more money and get deeper in debt. It's nice to have the equity if you need it, but you'll probably end up using it because you *want* something you can't afford and you'll use your overpriced home as collateral on more debt.
    • nilla, on 10/12/2007, -0/+1JFC, mortgages are not a scam. They're a simple example of the time value of money--see http://en.wikipedia.org/wiki/Time_value_of_money.

      Yes, you're paying (say) a total of $600k to pay off a $200k mortgage over the course of 30 years. Guess what, though--paying $x some number of years in the future isn't as bad as paying $x today--would you rather I paid you $20 today, or $20 in 15 years. You want $20 today since you could invest it for the next 15 years and have much more than $20 then. The time value of money lets you quantify what $x in the future is worth today under certain assumptions.

      Look at it from the other side--if you had $200k in the bank today and someone wanted to borrow it, you're not going to be happy with them paying a total of $200k back over the course of 30 years. Since you could invest the $200k in other investments, you want to be paid more than $200k over the course of time in return.

      Simple math and basic financial literacy folks. It's worth understanding this stuff as you go through your life.
  • AdebisiTheGamer, on 10/12/2007, -3/+1OK you can all rent your home from those of us who own homes to rent out.

    I'm cool with that.

    My rental property may have lost 10k in value last year, but I haven't had to reduce the rent I charge one cent. Infact I raised it 5% this year.
    • MorningCoder, on 10/12/2007, -0/+3Real estate market is local. Every subdivision is different. Where I live now, a $500K house is renting for about $2500 to $3000. Not much profit for the landlord if you factor in interest, tax, and maintenance. Appreciation for the next few years is likely to be flat. So renting make sense. Houses 20 min drive away are selling for $300K. Rent is around $2500. It would make sense to buy in that area.

      If bad neighbor move in next to you, what can you do? Your options are limited if you own. If your house got flooded or burned down, what do you do? If you own, you'll have to deal with the insurance company and hope you can recoup what you have lost. If you rent, you still have to deal with the insurance company but at least you didn't lost a house.

      Renting usually gives you better cash flow in the first few years. Which means you can drive a better car, dine out more, go on more vacation, etc. Owning builds equity, and gives you better cash flow in later years. You'll have more money for car, eat out, and vacation later.

      Personally I think rent vs. own is more a life style choice.
  • tritiumpie, on 10/12/2007, -0/+3Here's a link to the original chart that is the basis of silencer's "house values roller-coaster" video:
    http://www.nytimes.com/imagepages/2006/08/26/weekinreview/27leon_graph2.html
  • solbern, on 10/12/2007, -0/+2At this point, buying a house would seem like accepting my life is over. I'd rather be flexible and poor.
  • Mutaz, on 10/12/2007, -0/+5for very Disciplined people, Rent can be a wiser investment. Thats is you rent and invest the difference in long term investments.
    For the rest of us, buying a house is a great investment. Why, because a house suck all extra cash cutting from other things, mostly leisure..this build equity.
    Most people that rent, don't spend the money in investment, rather wasting money.
    So, I think buying a home is a good investment to most people most of the time.
    Again, there are times when the market goes down and you lose instead of gain.
    if we keep up with world growth, real estate will only go up in the coming 25 years.
  • dawgma, on 10/12/2007, -0/+1Cool! Is there something like this for buying a new CAR? Renting vs buying?
    • neeyo, on 10/12/2007, -0/+2http://www.bankrate.com/brm/calsystem2/calculators/autobuyvslease/default.aspx

      Just my 2 cents in advance: cars are never investments, they are costs. Would you buy a stock that was guaranteed to be worth at least 30% less in the next three years and would never be worth more than you paid for it?
    • msgyrd, on 10/12/2007, -0/+1You mean like leasing? I don't know of a guide, but listen to the guy above me. Cars only cost you money. Find something reliable that you don't mind driving, and just drive the hell out of it. Getting a new car every 3 or 4 years is a complete waste of money unless you think your status in society is based on what you drive. Between depreciation, interest, repairs/maintenance, and mpg ratings, there is absolutely no way to earn back your money on a car you regularly use.
  • kcmoss, on 10/12/2007, -1/+0Did anyone catch if mortgage interest deduction was part of the equation? If not, buying would have yet another additional edge to renting with relief on taxes.
    • Antialias, on 10/12/2007, -0/+1that relief is never more than the interest you pay. If you pay $10,000 in interest over a year, you might get $2000 less in taxes. You're still down $8k in that equation compared to renting.
  • griz, on 10/12/2007, -1/+1This chart neglects to factor in the tax benefits of buying vs renting.
    • Xeth, on 10/12/2007, -1/+1No, it accounts for the interest tax benefit because it asks for your income tax rate. It also accounts for the (probably larger) property tax liability.

      Also for you "renting leaves you with nothing!!111!!" people, the chart accounts for both the equity built up in the house and the equity built up from investing the extra money saved from renting. In many cases renting comes out ahead financially (it does in my market anyway). OTOH if you have the money/time/skills to rent out or flip houses it becomes a whole new ballgame.
  • Snowcone, on 10/12/2007, -1/+3With the default settings... $220k home for $1100/month? I think not. Adjust those to more realistic values and it takes 2-4 years instead of 11 years. Misleading, but still a neat tool.
    • Antialias, on 10/12/2007, -0/+1Except that those are realistic numbers. You can rent a $250k house in my area for around $1200 a month. It would cost you nearly twice that to own the house, you invest the difference and laugh all the way to the bank.
    • jasontm1, on 10/12/2007, -0/+1@snowcone

      In San Diego I saw a flyer for a property that was on the market for $460k... or as a rental for $1650/mo.

      It all depends on the location and situation. The tool had to start with some numbers and the ones there are not fixed in stone. Thats why you can change them for an accurate comparison in your market. ;)
    • zccopwrx, on 10/12/2007, -0/+1220k for 1100 a month is not unreasonable, they didn't take State and School taxes into the equation, which can add 200-600$ a month to that.
  • RyanOC, on 10/12/2007, -0/+1I looked into buying and it will double what I pay in rent. So why shouldn't I keep renting and put the extra money in some other investment?
  • scoreloot, on 10/12/2007, -0/+2We just purchased our first home, and have moved every two years prior, but I just got to a point where my family more than myself need somewhere to plants their 'roots'. To make long term friends and to build memories. I decided to buy, and my home is valued more than the price to buy the home, and had the seller pay all the fees. So I know in 10 years when I make the decision to sell, I will be in a positive position. In that time, and the fact my area is one of the fastest growing areas in the US, I know I will come out in a positive equity situation, but yes, there is alot more responsibility involved with owning the home. If you are not in a place to stay in one place for an extended period, at least right now when its a buyers market, then renting is for you. I will be sitting on my home for years before selling. But the pride of ownership in a home in a nice neighborhood outways any downfalls that may be from not renting. And I have a home warranty, so those things breaking only cost $50 per occurrence. And no one is talking the tax benefits in the US for home ownership versus renting.
    • AxeSwinger, on 10/12/2007, -0/+2Congratulations on your new home.
    • greenamp, on 10/12/2007, -1/+2Tax benefits? Renting is not taxed at all. So any tax benefit from owning a home has to be subtracted from property tax costs and compared to zero, which is the taxation from renting. In most situations you're probably still paying more in taxes even with home owners deductions.

      And not trying to discredit you or anything, but it seems like everyone who buys a home these days lays claim to statement of living in the fastest growing area and having purchased in a buyers market, both of which are Realtor marketing catch phrases.

      Not saying that you didn't make a good choice in buying though.
    • AxeSwinger, on 10/12/2007, -0/+2You deduct your property tax from your Federal Taxes and most states I know of take the adjusted income from the Feds and apply it to the State return. True your tax savings is diluted a bit by property tax but not as much as you portray.
    • Y0tsuya, on 10/12/2007, -0/+1Don't know, for me it's a wash. My tax deduction from mortgage interest is offset for the most part by the property tax. Yes I know you can deduct the property tax too. Just that there's not a big different.
    • AxeSwinger, on 10/12/2007, -0/+1It also depends where you are in your mortgage. We recently relocated and bought a new house. Most of our payment goes to interest right now. In five years I won't see the tax breaks I'm seeing now.
  • greenamp, on 10/12/2007, -0/+4Neat little dealio but according to the methodology listed below the graph, the calculations are based off the assumption that you would invest the monetary difference from cheaper rent vs. the more expensive housing costs ( down payment, mortgage monthlies ). It's not just a base calculation of rent vs. mortgage. It's geared more towards the investment side of the argument.

    Just sayin'.
  • anctony, on 10/12/2007, -1/+0One thing not mentioned yet is the unfair practices the apartments (at least here in Dallas TX)
    complexes do when you move out. I got hit with thousands on credit report for totally fabricated repair fees. They get away with anything they feel like doing. For instance if you move within the complex they say don't worry about repairs, if any. Yet if you move to another complex -cha ching- you pay for normal wear and tear, paint, carpet and anything else they may feel like coming up with. You don't like it?...Fook U pay me!
  • righteousyellow, on 10/12/2007, -0/+1check out http://flippersintrouble.blogspot.com to see how some flippers are losing out. A few months ago there were about 600 listings, and now that has almost doubled. This is just for the sacramento area. Might be a good time to get a foreclosed property for cheap.
  • saska, on 10/12/2007, -0/+1One major thing not taken into consideration here is the actual location of the property and the things that come with that location.

    Where I live I can walk to work, my kid goes to one of the best schools in the state, I have swimming pools and gyms open any time I want to use them, and somebody else has to replace my appliances if they start acting up. To own a home in this neighborhood I'd be looking at a $750,000 mortgage. My rent is a fraction of what that mortgage would cost me.

    If I wanted to move to the sticks, commute 50 miles each day, pay for a gym membership, and pay for private school, I could buy a house for what I pay in rent. But that doesn't strike me, in my situation, as particularly smart.
  • toxford, on 10/12/2007, -0/+0Buying isn't always better like some have said. Especially if you move in a few years. Including the tax refunds and money we made after selling, we would have been better off renting.
  • alohafound, on 10/12/2007, -1/+0in shanghai, this is slightly different. to buy is always better than to rent though the price is sky high. buy one house means sell your rest life to mortage. everyone is superfically with the concept rent is more reasonalbe than to obtain the property certificate but still have overwhelming inclination to take a house.
    matrimonial life with PERMANENT house is the basic achivement for a success.
    • Y0tsuya, on 10/12/2007, -0/+1You do know that Shanghai real estate bubble is already popping right? All those apartment towers and nobody's home.
  • abnoid, on 10/12/2007, -0/+2If you're still young, how about in your spare time growing your career skills instead of fixing houses and laying your own hardwood floors. I'm 28 years old and I could buy a place and stretch myself really thin, but I chose to use my spare time to advance my career skills and travel. Once you buy a place it will greatly effect your life decisions and you are not likely to get up and move and you are more likely to settle for your crappy job. In 5 years I may think differently but for now I'm renting.
  • DannyMurphy, on 10/12/2007, -0/+1It is all about location location location, I brought a house in Perth, Australia. There is a new railway line being built in the area which is opening in a few months. Plus the area has only 3% unemployment. I brought the house for $215000 12 month ago it is now worth $350000. I know until it sells I haven't made a penny but I would be getting any return if I rented a property and I would be the extra $135000 of getting the first rung of the ladder.
    • galore, on 10/12/2007, -0/+0"I brought the house for $215000 12 month ago it is now worth $350000"

      If that's the case then the previous owner was a real moron to sell it for so cheap just a year ago.
    • zccopwrx, on 10/12/2007, -0/+1Not really, the previous owner probably paid 165000 originally, sold for 215, so now its worth 350.. welcome to homeownership.
  • JoeyDeacon, on 10/12/2007, -0/+1The housing market in the UK has been crazy for the past ten years and in my opinion will be following the US in a sharp correction and decline. However in the last ten years it has been possible to make huge amounts of money on housing.

    Just for example I bought my first flat 7 or so years ago for £165k (approx $325k). 3 years later I sold it for £315k ($600k). With the profits from this I was able to buy a house for £500k with a £300k mortgage. 3 years later again and the house is worth £800k and the mortgage is £250k so theoretically I have £550k in equity if I were to sell the house today. Of course until I sell the house the profit is purely paper.

    Now in the perfect world I would sell the house today and take that profit and then rent for a year or so because in my opinion the market is heading for a dive. Alternatively I'd take my cash and buy a cheaper house mortgage free. This is easier said than done however when you have a wife, small child etc.

    Despite what you read above I don't think that the rapidly rising house prices are a good thing as ultimately they present a false impression of wealth and the only people who truly get rich are the banks and estate agents. The young and first time buyers are simply wasting more and more money on longer and longer loans with a great risk at this time of negative equity.

    Buying a hosue is not the be all and end all of life. At the right time of your life and of the market it is probably the right long term decision. It is of course a multifunction investment as unlike stocks and shares you can live in it. People shouldn't be frightened of renting however because if you can't afford to buy then you simply can't afford to buy and if enough people can't afford to buy then prices are too high and will come down.
    • galore, on 10/12/2007, -0/+1How is property tax handled where you live?

      Here in Dallas, the tax is appox. 2.8% of assessed value each year. The value is re-assessed after each sale and at that point fairly accurate (the assessed value can be totally off for properties held for many years; Usually the assessed value is much lower than the real market value).

      If you go from a $325k house to a $1.6M house in Dallas, you are looking at property taxes go from $9100/year to $44800/year.
      So even if you own this house free and clear, you have to pay $3733/month in property taxes alone.

      This can be deducted from your income taxes, which effectively reduces the tax to $2500/month but still, such a jump in tax alone would make riding the appreciation wave impossible here for most people. That is probably one reason why we don't see stratospheric appreciation (and to avoid the stereoptype that nobody would possibly want to live here: The metroplex is currently at about 6 million people and grows by about 150000/year).
  • LowRentDiggs, on 10/12/2007, -0/+1Being a virgo in a rental house is very difficult. I want every detail in the house to be perfect but it's a waste for me to spend money fixing up someone else's house even if I live in it. I'm kicking myself now for not buying a house around 2000 when I could have gotten a nice house for less than 200 that would be worth close to 400 now :(

  • jcaino, on 10/12/2007, -2/+1wow - i post an honest experience, and get dugg down?

    you people ARE ***** retarded.
  • davescarpetti, on 10/12/2007, -1/+0What NO CALCULATOR can take into consideration is the intangible burden of homeownership. When the water heater ***** the bed, plumbing overflows, gas main breaks, gutters need to be replaced because of that ice storm, wet basement, etc. It's ALL YOUR PROBLEM. You need to have the temperment to be able to handle homeownership. I absolutely despise owning a home, but my wife thinks it's the best way to gain stability for our daughter. I despise homeownership.
    • zccopwrx, on 10/12/2007, -0/+1Yeah, and if all of that stuff is done correctly, it lasts 10-15 years, if you keep up on home maintenance, its much easier.. Like keeping your gutters in good working order will prevent a wet basement

      I see your point, but as with most things in life, there is a certain amount of effort needed to keep things smooth.. If your the type of person to put things off, and let all of that snowball up at once, then your doing things wrong.
  • nesibus, on 10/12/2007, -0/+1After being hit by hurricanes here on the gulf coast, financially after it hits its way better to rent. Everyone who got screwed by insurance companies had to pay the thousands out of pocket to get their house fixed up for next hurricane seasons.

    The apartments I live in cost me nothing, the owner had to fix everything wrong. If I would have lost the entire apartment, I go find another one.

    My g/fs mom lost her house and the appraiser valued it way down, so she was out big time and had to do all the work with help from friends just to be able to afford to get it back on track. She didn't get enough to get another house or even knock this one down, it was in bad condition, she used the little bit they gave her to make it ok enough to live in.

    Now here comes this hurricane season again....I like my apartment.
  • jimcarrey363, on 10/12/2007, -0/+1is this a serious question?

    In the U.S. renting is so retarded. Might as well just throw your money out the car window

    Unless you only need a place for a couple months... I guess
  • snoopy456, on 10/12/2007, -0/+1***** happens and there is always a scenario where the renter looks smarter than the homeowner. In the long run home ownership is the way to go especially if you can rent out part of it. I have owned a 2 family for 10 years now and since buying it I pay almost zero taxes because the system is stacked in my favor. Anytime I buy anything at the hardware store it's deductible. The knock on effect is that puts me over the threshold where filing for individual deductions allows me to now add other stuff like computers etc. into the mix. I get to depreciate, write off and and have an income from the property. The downside is for the first three years it would have been cheaper to rent and put that down payment into the market in the short term. In the long run though my investments in the market have not even kept pace with inflation. I refinanced into a 15 yr mortgage and pulled out some cash to buy a new car about 5 years ago. So the bottom line is if I sold today I would walk away with $300,000 to $400,000 clear after taxes. I could hold it and within 7 years own it free and clear.

    Something else to keep in mind - rents go up and your mortgage payments go down (inflation) and your equity builds.
  • BigSlacker, on 10/12/2007, -0/+0Mine went up 20% this year alone. I could take a major dump and I'll still have a hundred grand or so in equity and that's in about 9 years of owning. If you're going to stay in one place for very long, and have 10K or so in savings, it's pretty dumb to just hand your rent money over to someone else. It's a 100% net loss.

  • zccopwrx, on 10/12/2007, -0/+3I skipped the ENTIRE renting scene and went straight into a nice house with 2800 sq/ft of living space. I watched the rest of the world WASTE money on rent, when all that time they could be building equity in their own house.. Houses only increase in value (.. generally speaking.. ) so if you can afford it, theres really no reason NOT to. Then again, there is a percentage of the world that has no interest in owning a home.. But economically speaking, if the "housing" market is getting more expensive.. Imagine owning the home now, and seeing how much your investment appreicated over the next 5 years..
    • galore, on 10/12/2007, -2/+1"I watched the rest of the world WASTE money on rent"

      While you WASTE money on interest, provided you used a 30 year mortgage (you are aware how mortgage amortization works, are you?).
      You just got LUCKY buying before a wave of appreciation. You could have also gone to Vegas and made money quicker.

      "theres really no reason NOT to"
      Oh yes, there are many, among them:
      * upkeep responsibility
      * closing costs
      * possible depreciation
      * property taxes
      * yard maintenance
      * lock-in (can be more difficult and very expensive to sell vs. moving out of an apartment)
      * usually higher insurance cost
      * usually higher utility cost
      * usually longer commute

      I used to rent from 1998-2000 and was able to save a LOT of money. Since I bought a house in the 'burbs, that stopped. This house only appreciated from $250k to $300k. Sold it last year. After all the closing costs (both buying and selling - hello 6% realtor comission), the property taxes, the insurance, the interest payments, I'd be deluding myself thinking that this was a wise investment.
  • davidebacci, on 10/12/2007, -0/+1There is a whole website dedicated to this type of thing. i had a look when someone posted a link and it provides a lot of insight into the current property bubble. Buying at the moment in the UK would be utter madness.

    http://www.housepricecrash.co.uk
    • BigSlacker, on 10/12/2007, -0/+0I don't know about the UK but people keep saying the same thing in the US. The people that listen are losing out while those that don't are making big bucks. It's only some properties and certain financing terms that are a bad idea and not buying in general.
  • topnotchnet, on 10/12/2007, -2/+0----
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