The trouble is the very very poor quality of the rental stock

Some of housing for sale is poor quality as well. I know someone in a very high quality rental and there is no way they could afford that same quality in a house if they were to buy. The rental is beautiful.

I did not use a calculator but we bought when interest rates were lower and homes were cheaper. No way could we rent our 4 bedroom, close to metro home for our current mortgage payment ($4300 including taxes). But with prices higher and interest rates high, it is worth really thinking this through.

https://www.nytimes.com/2023/12/01/podcasts/the-daily/should-you-rent-or-buy-the-new-math.html

Calcs cant predict appreciation because its so market dependent. Its basically taking a gamble on your neighborhood. Rental inflation is a little easier IMO - just look up a rental on Zillow today and assume 3% YoY increase. Yes yes some rentals increase faster and slower, but 3% YoY feels reasonable.

Now is a terrible time to buy (high prices and high rates), granted we decided to go for it anyway but it was more due to the intangibles than purely a smart financial decision.

That being said, those calculators do not take into account the appreciation the property you own will have, plus given today's rates you would also want to play various scenarios (on the owning side) with mortgage rates, since they are bound to fall within the next 24 months. Technically with mortgage your payments are relatively stable (they would increase slightly due to appreciation/higher assessment and property tax on that but negligeable tbh) but with today's rates your mortgage is more than likely will go down. With renting, on the other hand, there is a higher probability that it will increase.

All that being said yeah, as of today, cetris paribus, renting makes more sense, but once you take into account other factors, the decision is not so cut and dry.

Have those calculators ever accurately predicted either appreciation or rental inflation?

What calculator did you use?

I'm trying to figure this out myself, but it seems to be asking me for the going rate of renting a comparable place, and I'm not sure if the calculator is taking into consideration the current interest rates (Zillow).

Its extremely difficult to come out better just a purely financial standpoint owning vs renting. Rent prices are still way south of monthly ownership costs and accounting for the spread of monthly costs AND down payment opportunity cost makes it a tough financial case to buy.

I think it only makes sense if you can stay put for at least 8 years AND there arent suitable rentals in the area.

The trouble is the very very poor quality of the rental stock

Anonymous wrote:Six years is a really short timeframe to be calculating. That's like bare minimum break-even time. Is there an actual reason you think you'd be moving in 6 years or less?

I’m OP. I didn’t run the calculator out to break even time. I picked 6 years because we expect one of us to qualify for a much higher paying role in at least that time. It said at 6 years, we would save (and be able to invest in mutual funds/etfs) over 50k in six years if we continued renting vs. buying. Considering we are in and approaching our highest earning years, that’s important because we are investing for retirement at 65 or earlier.

I was just shocked to see the numbers.

Just did the calculation today and I would be crazy to buy. I know the home I want and how much it would cost me to buy it right now.
Also, I have supposedly very high risk tolerance in the market - like one crypto and one stock only and it has paid off. I don't consider it high risk at all. Risk is not to be in the market.
I have owned, and it didn't make me happy or give me warm and fuzzy feeling. I actually lost money on three different properties without doing the renting vs owning. They were all bought for living.
Sold all, put money in the market, it tripled in tow years, and I reallocated. I also learned a lot more about the market in short years than owning real estate for 15. Helps that I love my rental, bonus that it's cheap and landlord is awesome.

We sold and rented for a bit intending to buy but our OOP monthly would be more than double for the same house. Just doesn’t make sense. We also love not having to pay for repairs. We have a slightly higher income, with kids.

Six years is a really short timeframe to be calculating. That's like bare minimum break-even time. Is there an actual reason you think you'd be moving in 6 years or less?

That's a respectable HHI. Can't really say if I don't know what your living situation is like, or if you have kids.

The plus sides to owning a house is that it contributes a lot to your net worth, and your monthly payment is stable. You also get more space for the money, generally. But you definitely should factor in maintenance costs. That was something we knew we'd have to deal with, but what was shocking was just HOW MUCH it was. Granted, if you are naturally handy, you can mitigate a lot of it, but if you're buying an older house, plan to set aside around $10K a year for a repair budget. And if you end up not needing it one year, then you can put that towards a capital improvement to the home.

I never did a rent/own calculator except in my own brain—there are intangible benefits to either that don’t fit in a calculator. I don’t think homeownership is the most foolproof investment, but if you love the location, plan to stay for more than a couple of years, and don’t buy a money pit, then having something to build equity in that is yours, it could be worth it whether interest rates stay the same or not. It does seem like you will be constantly chasing home prices, which if they go down, never by much around here.

I just used a rent vs buy calculator for close to DC suburbs with decent public schools (not just W cluster), and it showed that we are saving money by renting where we are living now vs. buying (not including needed repairs like new roof, hvac, etc.).

It expects us to save money by renting over the next six years.

We make 350k, 40 years old dual income couple.

So we are still renting for now. Not so desperate to buy that we are willing to make a bad deal.

Would declining interest rates change the math meaningfully? If you own a home that you purchased in the last ten years, did you do that math before you put down offers?