rent vs. buying?

Question

In this economy, is it better to rent a house or buy one?

Answer 1

It depends on where you are. In my neck of the woods, the answer is to buy. It is a buyer's market, there is a ton of inventory, and sellers have to be more receptive to offers if they want to sell. There are so many tax advantages to buying also, and while you rent, you are paying someone else's mortgage.

Answer 2

Where is "this economy"?

In San Antonio, Texas - Too many investors bought here in the last 2 years. This falsely increased property prices - I think they'll fall next year. It also flooded the market with vacant rental units - rent prices have dropped a bunch.

The question is still a bit up in the air - If you're going to stay in a house a long time (more than 8 years), today's interest rates are something to grab on to. Buy in a year at a lower price, but higher interest and it might not pay off. But if you'll be moving in three or four years, rent for a year and buy in the fall of '08.

Answer 3

It is not a simple answer because it depends on the market where you are, your income stability, and how long you intend to stay in the home. I've looked at various “comparison calculators” and the one that I feel is the most impartial is one provided by Ginnie Mae, a semi-government organization.

The calculator on their website requires minimal information but it provides a realistic estimate. The information the calculator requires is listed below along with recommendations if you don’t know the answer to some of the questions. Please note that this calculator does NOT take into account the single biggest advantage of home ownership after appreciation: tax savings. You can generally deduct all taxes and interest paid on a home mortgage from your taxable income. This is a huge advantage of home ownership and is alone usually sufficient to justify purchasing a home as opposed to renting.

You are asked a few questions with the Gennie Mae Calculator. Here are the questions (other than price) and possible answers.

Percentage of Down Payment: Enter 0% down unless you are rolling over proceeds from a prior home.

Length of Loan Term (years): Most mortgages are for 30 years.

Interest Rate: Use 6.5% or even 7.0%. However, depending on your FICO score you can readily get lower rates.

Years You Plan to Stay in This Home: The national average is 5 to 7 years.

Yearly Property Tax Rate: Use the default 1% to be conservative.

Yearly Home Value Increase Rate: We are all in a housing slump at this time so this is a hard number to guess. I would start by entering 5% if you are holding the home for 5 years or more. However, in some areas of the country there was no appreciation even during the recent housing boom times. So, this is something you will need to research for your particular area.

Here is the calculator:
http://www.ginniemae.gov/rent_vs_buy/rent_vs_buy_calc.asp?Section=YPTH

Eric Fernwood
[e-mail]
http://www.iselllvhomes.com/

Answer 4

Depends on how long your going to stay. Renting is like throwing away money. When you buy a home you are investing your money into it, and not someone elses property. when you sell your house, even if you dont get more than you paid for it, you should still get most of your money back that you have put into it.

Answer 5

Michigan here, definatly to buy. It is a buyers market here, and houses that sell for 450,000 are selling for 220,000. A 100,000 house (payments under $900 including taxes and insurance) has 3 bedrooms and 2 baths with garages! Alot better then a two bedroom in New York. Why feed teh landlord, when you can build equity?

Answer 6

Current empirical research supports bear market for real estate. Economists are forcasting that the market will bottom out around 2010.
If you're looking short term - DON"T It's better to rent.
If you're looking long term (meaning more than 5-7 years, then it's better to buy.

Answer 7

location, in the DC area I would say wait about 6 months.