Moving in 5 years, Would you buy a house?

[Anonymous]

My neighbor's house was appraised at 1.2M (about what he paid) recently. On Zillow, the estimate for his house is 990K. Even the owner laughed at his appraisal. There's no way he could sell it for anything close to what he paid for it a year ago.

I tried to sell my house this summer, and couldn't get anything close to what I paid for it 5 years ago.

According to what I'm reading, there are lots of foreclosed properties that will glut the market in the next year or so, forcing prices down for the foreseeable future.

So, my answer to your question is: maybe.

If you can find a foreclosure that's super-cheap, why not buy? But make sure it's a real bargain. And be prepared to rent it if you can't sell it in 5 years.

Otherwise, just rent. You don't want to be where I am: stuck in a house I can't sell in a place I don't want to be.

Oh, and my neighborhood was white hot when I bought 5 years ago. No one had lost money buying in my area--until now.

[Anonymous]

I think the one thing that nobody is factoring in here is that not everyone has super cheap rent. There is also the issue of whether or not OP would buy just any house or only buy if she got a true bargain. You don't live in a house for free, right? I actually pay about the same amount on my mortgage (including HO insurance) as I did on rent because I found an amazing bargain of a house and I had some space needs that made renting expensive. The tax incentives this year make up for any closing costs we paid (we got the seller to pay most of ours but some lenders may actually resist this so you can't count on that).

I will say that I believe the market is going to continue to depreciate but at the same time, interest rates are really low right now so there are cost savings there as well. And I'm not sure the market will depreciate so significantly over 5 years that it will tip the rent / buy equation for every person and every house.

Bottom line: I think 5 years is still the minimum time to stay in a home, but given the right circumstances, I think it can make sense. I liked the person's formula above, but if I were to make tweaks, I would NOT assume a 4 percent appreciation (I'd just say no appreciation) and I'd add in the cost of renting (which is not an investment) as well vs. the cost of paying interest vs. the tax cuts for that interest.

Actually, OP, what you need to do is sit down with a financial planner...

[Anonymous]

I'd lean against, but one of the nice things about owning is you are guaranteed to stay put. This may be important for public school. It isn't always clear you can rent the house you want in the same district.

If you do buy, buy WAY below what you can afford.

[Anonymous]

PP makes a good point. It's hard to find a five-year lease in this area, so you may have to move once or twice during the five years if you rent.

[Anonymous]

No. But i would like to come with you when you move. LOL!

[Anonymous]

Anonymous wrote:

Anonymous wrote:The numbers poster also forgot to include property tax cost and a reasonable amount spent on home upkeep. Two costs you don't have if you rent.

The NYTimes has a great little applet that does this calculation and will include things like tax, upkeep, increases in rent, tax rate, investment rate of return, etc.

http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html

Yep - and don't forget HO Insurance as well.

I'm the PP that said "hell no!". I have a house in Ohio (which I understand is a worse real estate market, but let me make my point...) that I have been trying to sell for nearly 4 years now. It's now listed at 15% less than what we paid for it 7 years ago. We just dropped the price today by another 4%. So the PP's that made the point about what houses appraise for vs. what they sell - here's a perfect example. The county has it appraised for 6% higher than what we now have it listed at by the way. I never thought I'd be a long-distance landlord for four years. It's so not worth the gamble.

Anyone want a very good deal on a beautful Victorian house in Lakewood Ohio, by the way? The price is really great!

I love Lakewood! I grew up in Bay Village but my first house was in Lakewood.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The numbers poster also forgot to include property tax cost and a reasonable amount spent on home upkeep. Two costs you don't have if you rent.

The NYTimes has a great little applet that does this calculation and will include things like tax, upkeep, increases in rent, tax rate, investment rate of return, etc.

http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html

Yep - and don't forget HO Insurance as well.

I'm the PP that said "hell no!". I have a house in Ohio (which I understand is a worse real estate market, but let me make my point...) that I have been trying to sell for nearly 4 years now. It's now listed at 15% less than what we paid for it 7 years ago. We just dropped the price today by another 4%. So the PP's that made the point about what houses appraise for vs. what they sell - here's a perfect example. The county has it appraised for 6% higher than what we now have it listed at by the way. I never thought I'd be a long-distance landlord for four years. It's so not worth the gamble.

Anyone want a very good deal on a beautful Victorian house in Lakewood Ohio, by the way? The price is really great!

I love Lakewood! I grew up in Bay Village but my first house was in Lakewood.

Really?! Want to move back? Haha! I grew up in Amherst -- I wonder if we were in HS at the same time? Bay and Amherst compete at sporting events. Maybe one day long ago we were at the same football game... Such a small world.

[Anonymous]

This is a really interesting article on this topic:

http://genxfinance.com/2009/07/07/your-home-is-not-an-investment-dont-treat-it-like-one/

[Anonymous]

OP, I think something else to consider is whether you'll be able to stand living in a rental for 5 years. Will it annoy you that you can't change certain things about the house? I understand that losing on a house you buy is a HUGE issue, but I think you also have to consider whether you'll be able to truly make a rental your HOME for five years. For me, that factored into our decision to buy sooner than we expected when we moved to a new area.

[Anonymous]

Anonymous wrote:This is a really interesting article on this topic:

http://genxfinance.com/2009/07/07/your-home-is-not-an-investment-dont-treat-it-like-one/

I hate to say this, but that article had bad assumptions and did not take into account that if the owners has not bought, they would be paying rent somewhere else, which was not factored in. They also didn't count things like the one time tax rebate this year, nor did it allow the homeowners to have any enterprising ideas of prepaying the mortgage to reduce interest payments and pay more principal, etc. This was basically like "if you know nothing about finances and buy a house, you're probably not going to make a lot of money." They say that the person would be out a certain amount of money. Depending on cost of living in the community, that number might have paled besides rental payments.

If you can afford to buy and know how to do it responsibly, it's still the best option.

[Anonymous]

Regarding appraisals vs. selling prices, it really depends. We are preparing to sell in close-in Bethesda in a neighborhood where houses are still selling in a matter of days. Three realtors gave us pricing estimates between 750 and 850K, and an independent appraisal came in at 850K, so really not that off the mark. Reputable appraisers are no longer high-balling the appraisals--that was mostly an issue during the go-go housing bubble era when everyone had an incentive to make sure houses appraised high so that the loan could go through. In fact, there was just an article recently in the WSJ (or maybe NY Times) that said that these days, appraisals are coming in too low!

[Anonymous]

PP again--here is the link:

http://online.wsj.com/article/SB124450388959795613.html

[Anonymous]

Buy something below your financial means, but in a popular area with good schools. (i.e. condo, townhome--these also have less associated costs, like yard, maintenance, etc)

That way you'll have less trouble re-selling, and you won't be stretching to make payments. AND you'll get tax benefits of owning AND not flush rent money down the toilet. I could see 1-2 years of renting, but 5 years of rent is a lot of lost equity. Even if you lost a little or broke even on the house, it's still likely to be less money than you'll be handing over with 5 years of renting.

Also, if you know you're only going to be in it 5 years, consider one of those 5 or 7 year ARM loans (if they still have them), as you'll move before the rate goes up. A little risky, though, in case you have trouble selling.

Just the 2 cents of a homeowner several times over.