Maybe You’re Thinking About Buying a House Right Now
In fact, in every single one of America’s 100 largest metros, according to the report, owning is now cheaper than renting. For renting, these numbers include renter’s insurance and a security deposit. The numbers for owning include closing costs, maintenance, insurance, and property taxes, and assume the house won’t be sold for at least 7 years.
Are you ready to stay in a place for at least seven years, and have some money saved up for a downpayment, and a stable job you can rely on to pay the mortgage? Maybe you read about the Federal Reserve’s decision to keep long-term interest rates low, and feel okay about borrowing money from the bank to buy a house. Consider your options, which, most importantly is where you’re thinking of buying, because places like New York, San Francisco, Honolulu still aren’t that cheap.
I rent in DC with my boyfriend. He actually ran the numbers on our house when we first moved in and figured out how much cheaper it would be if we could’ve bought the same house. Unfortunately, paying rent is making saving even a small down payment a huge pain in the ass.
I looked for a one bed, one bath condo in a similar area to where I live in my one bed, one bath apartment, plugged it in to the NYT buy or rent calculator, and determined it is never better to buy than rent. Even if we bought and sold six years later at a higher price, renting still has a huge advantage (saving >$100,000).
Who is saving money by buying in San Francisco? Are they comparing renting in SF to buying in nearby counties? Where are you living where your entire house ownership monthly cost is $2000?
In the last month I have come to the decision that I’m ready to buy here in DC. The mortgage amount I am preapproved for is pitifully low, though, and I am still working to clean up my credit a bit (just got my very first credit card, tracked down a collection’s debt from 2006 and slayed it’s ass with an immediate payment), but even with condo fees, maintenance costs, etc., it will be less than what I pay to live in a 250 square foot basement right now. Plus I’ll be able to put in a real fucking kitchen, which is one thing DC rental units universally lack (no, two cabinets and an 18″ stove do not a kitchen make).
However, I’m Way Super Lucky to have a bunch of money just hanging out waiting for me to make a big purchase like this (and do some moderate renovations). I can’t even imagine trying to save for a down payment.
I gots noooooooo down payment money. Like MuffyStJohn and KatNotCat, I’d be buying in DC. Plus, sometimes I want to move to the desert.
@probs The down payment thing is the big issue. Most of the people I know who’ve managed to buy a house had a significant amount of family money (as in six figures) given to them for that purpose. Which is great. I don’t want to sound like I’m knocking them.
But that’s one of the insidious ways that wealth gets transferred from one generation to another. We can’t all take Mitt Romney’s advice to borrow from our parents whenever we need cash. Our classless society indeed.
@probs Move to the desert. We love our current place so if we somehow got the opportunity and money together to buy it we might, but the cost of everything in DC is wearing us down and we’re leaning more and more towards “buy in a mid-size city somewhere else.”
There is so much variation here though.
The numbers make a lot of assumptions though, for instance per the report: http://www.seattlepi.com/realestate/article/Report-finds-buying-a-home-way-cheaper-than-3860870.php
It’s $978/month in Seattle as far as average homeowner’s costs.
I ask WHERE are those houses in a city where the median price is $378k?
I work with people who have moved out of their underwater condos, rented it out to someone and rented a bigger place to live in because it was cheaper.
The situation is really complex to make blanket statements, it’s smarter to teach people how to calculate it out and let them make a decision. A lot of people got into financial trouble by following general advice during the housing boom.
It could be cheaper, it could be more expensive depending on where you want to live, how far away your job is, etc. In the area of the metro I live in, renting is way cheaper than owning because the houses are wicked expensive and rents are relatively cheaper.
Downpayments are a huge issue too.
For Seattle I’d say: “Yeah buying is cheaper, if you want to forego your social life to live way out it in the boonies”
I just got rid of my house which was purchased exactly 7 years ago. I just walked away from it. It was a stressful and emotional experience but probably one of the best decisions I’ve ever made (must better than the decision to buy the damn thing at the top of the market. who knew things would crumble?). The combination of the house being underwater plus the cost of maintaining it and being stuck (I tried renting it, that’s a huge hassle!) combined made it really not worth it to keep it. It will sell for about half of what I owed the bank.
I was scared that the bank would chase me down for the defaulted loan but in this market, most of them aren’t doing that. They foreclose, it goes on your credit report for sure, but I don’t owe them anything. The banks would like you to try to do a short sale and then just leave the house intact and not damage it. But, for all you crazy kids who are buying houses now, good luck!
By those kinds of calculations buying my house WOULD have saved me money over the last five years. The reality is that I’m paying a lot more in maintenance. A whole lot.
I don’t mind it too much because I deeply enjoy being a homeowner. However, I’m definitely paying for it.