No one else has mentioned this so here goes. I'm getting frustrated with the housing search and not being able to find something I like (layout, kitchen, etc.) in the area I want to be in (regardless of price). We haven't quit yet, but more and more it's starting to feel like the amount of effort required just isn't worth it.

Anonymous wrote:

Anonymous wrote:Also, when you say buy, what exactly do you mean? My husband and I live in a great apartment in Old Town now - no chance in hell we could afford to live here if we wanted to buy.

Let's leave aside the other reasons we wouldn't buy at the moment and only consider that: at least as far as we can see, we'd have to move either to a part of town where we don't want to live, or else to an apartment we wouldn't want to live in, if we were to buy.

What would you recommend we do?

This is the true crux of the issue. You believe you are entitled to a nice home in the right place, but you can't afford it. So you rent. It's just like leasing a car or buying shoes on credit. You want something you can't afford.

I did live in a part of town I didn't want to live in, in an apartment I didn't like for years - while I saved money for a downpayment. I could have rented a fabulous place for much more, but then I would still be renting.

If you are truly renting to save money and investing the rest (as PPs suggest), that's great. But I think many people are simply renting because it's a way to live beyond their means.

You are projecting your own feelings/opinions on the pp. I see no mention of bounced checks or unpaid bills, so how can you infer they are living beyond their means? They sound perfectly content with their situation.

Anonymous wrote:You believe you are entitled to a nice home in the right place, but you can't afford it. So you rent. It's just like leasing a car or buying shoes on credit. You want something you can't afford.

I did live in a part of town I didn't want to live in, in an apartment I didn't like for years - while I saved money for a downpayment. I could have rented a fabulous place for much more, but then I would still be renting.

If you are truly renting to save money and investing the rest (as PPs suggest), that's great. But I think many people are simply renting because it's a way to live beyond their means.

You are making quite a few assumptions, projecting your own experience on to someone else. Not everyone has to do what you did to make the decision that's right for them.

Anonymous wrote:But what happens over time? If you rent somewhere for $2000 and you could buy for $2500 on a fixed rate mortgage, and rents go up by 4% a year! you are no longer investing the "excess" after 6-7 years because there is no more "excess". Your rent is now more than the fixed rate mortgage. Now it's the homeowner who is investing all the extra money they have, that increases every year, as rents rise and a fixed rate mortgage stays the same. In 20 years you're paying $4000+ for that same property while the homeowner is paying $3000 or less even with property tax increases, and is looking forward to having it paid off in ten years, at which point you'd pay probably $6000 while the homeowners pays just property taxes and insurance and has a valuable asset to boot.

Perma-renters always seem to look at a snapshot in time, or at most a 2-3 year horizon. They compare a $2000 rent NOW to a $2500 mortgage NOW and think it's a good idea to rent. In five years that same property will require a mortgage of $3000 while their rent is $2400 so renting will be a good idea THEN. In 15 years the same property will require a mortgage of $4200 while they can rent for $3700, so renting will be a good idea then as well.

Then after 20 years of renting they'll accuse people who have tons of equity in their houses of being "lucky" to have bought before a price run up or two. Uhhhh no.

I'm more than happy to live in a house I love, even if it costs a little more now, knowing that I am cheapening my living costs over time with inflation, while rent increases in urban areas generall run a point above inflation, so renting gets more expensive all the time.

Hah, they are lucky. None of us can predict what areas will increase in value. Forgot even the housing bubble; if you bought in Cleveland or Detroit you would be way ahead renting.

Plus, rents going up 4% for long periods would be mad inflation; likely your income should be rising as well and thus you can bank the difference.

You are neglecting the costs of maintenance, property taxes, etc.

And yes, if you can buy for maybe $500 more, that may work out with tax deduction. But prices are much much higher than that, you are making a strawman argument for a case that doesn't exist. There is a price for homes where it doesn't make sense to buy vs rent.

http://www.nytimes.com/interactive/business/buy-rent-calculator.html?_r=0

...or, again ,because they do not have a down payment.

Recent article form the NY Times on how student debt is affecting the housing market. Thankfully my husband did not have the same amount of student debt that I did, or we'd still be saving for a down payment for many more years.

http://www.nytimes.com/2014/05/15/upshot/the-role-of-student-debt-in-stunting-the-recovery.html?ref=education

Reasons why we rent:

1) Our rent is cheap. Cheaper than the mortgage on a similar house in the same neighborhood.
2) We're not in a great school district, which leads to . . .
3) We may well move in 3 or so years when DC is ready for public school.

Anonymous wrote:Also, when you say buy, what exactly do you mean? My husband and I live in a great apartment in Old Town now - no chance in hell we could afford to live here if we wanted to buy.

Let's leave aside the other reasons we wouldn't buy at the moment and only consider that: at least as far as we can see, we'd have to move either to a part of town where we don't want to live, or else to an apartment we wouldn't want to live in, if we were to buy.

What would you recommend we do?

This is the true crux of the issue. You believe you are entitled to a nice home in the right place, but you can't afford it. So you rent. It's just like leasing a car or buying shoes on credit. You want something you can't afford.

I did live in a part of town I didn't want to live in, in an apartment I didn't like for years - while I saved money for a downpayment. I could have rented a fabulous place for much more, but then I would still be renting.

If you are truly renting to save money and investing the rest (as PPs suggest), that's great. But I think many people are simply renting because it's a way to live beyond their means.

OP, read Niall Ferguson (Harvard professor of economic history). For purposes of investment, housing has historically been inferior to multiple other investments opportunities (e.g., passive mutual funds, and even bonds at times). That's even factoring in the tax relief one gets in the United States.

Similarly, landlords in this thread talking about suggesting renters are suckers and bragging about their bank miss the fact of their opportunity cost. You could sell your rental property and put the equity from that sale into various investment vehicles. Again, you've merely chosen one invetment over another--one that historically is inferior to the other.

We're new owners, but we bought because we wanted a consumption object that would give us greatest utility. We could have bought two new luxury cars, but we put it into a downpayment instead because we believed it would give us greater utility. Certainly we think our house will depreciate a rate lower than the sedans, but that's not really the point.

Anonymous wrote:Also, when you say buy, what exactly do you mean? My husband and I live in a great apartment in Old Town now - no chance in hell we could afford to live here if we wanted to buy.

Let's leave aside the other reasons we wouldn't buy at the moment and only consider that: at least as far as we can see, we'd have to move either to a part of town where we don't want to live, or else to an apartment we wouldn't want to live in, if we were to buy.

What would you recommend we do?

I actually wonder if OP is in the real estate or mortgage brokerage market and is frustrated by slow business this year.

We had enough of a down payment to buy during the downswing and would have bought then but as govt contractors we were nervous about our job situation. Once DH had a more stable position, we decided to buy.

Point being, people have all sorts of reasons to rent vs. buy.

Anonymous wrote:Just curious. Especially with the cost of rent in most DC rentals hovering around 3K a month, what is the motivation for not putting that same money into your own homeownership? I'm in my 40's, & bought my first property in my 20's when I started to feel like I was throwing money away, or putting it in someone else's pocket. I have had the same renters now for a number of years, & they are essentially paying my bills. This isnt meant to be snobbish or argumentative, but just curious, especially with such high rent these days.

Did somebody drop on your head when you were little?

Anonymous wrote:Most people I know renting aren't paying $3-4K. They're paying $1.5-$2.5K, and they're doing it because they don't have enough yet for a down payment on a house. Sure, sure - they could cut the rent by 25% and live further out and pay $1500, but then they'd need another car/gas/insurance and spend less time with the kids due the commute. So we'll rent a smaller or crappier place closer in for the $2k for now while we continue to save.

If it was as easy as saying "I feel like I'm throwing money away! I'll buy a house!" We'd all BUY A HOUSE. But you might not realize that 20 years after you did this, financing isn't as easy to get, and with the economy as it is, a downpayment isn't as easy to build.

So maybe that's why more renters don't buy a house. If your tenants are paying $4k a month, then it seems like they could downsize and save more, but I can't speak for them.

To answer your larger question, the answer is: not everyone can afford to buy a house. That's why. It has very little to do with "motivation" as you put it. It has to due to due with money, or lack of it.

I still think you sound snobbish, or you must not know many people who aren't rolling in high salaries or large savings accounts.

That's not true. Some people like to rent. More flexibility. Landlord to take care of things. Want to be able to move quickly etc.

This reasoning works assuming there is inflation. There's been no inflation to speak of over the last 10 years.

[quote=Anonymous]But what happens over time? If you rent somewhere for $2000 and you could buy for $2500 on a fixed rate mortgage, and rents go up by 4% a year! you are no longer investing the "excess" after 6-7 years because there is no more "excess". Your rent is now more than the fixed rate mortgage. Now it's the homeowner who is investing all the extra money they have, that increases every year, as rents rise and a fixed rate mortgage stays the same. In 20 years you're paying $4000+ for that same property while the homeowner is paying $3000 or less even with property tax increases, and is looking forward to having it paid off in ten years, at which point you'd pay probably $6000 while the homeowners pays just property taxes and insurance and has a valuable asset to boot.

Perma-renters always seem to look at a snapshot in time, or at most a 2-3 year horizon. They compare a $2000 rent NOW to a $2500 mortgage NOW and think it's a good idea to rent. In five years that same property will require a mortgage of $3000 while their rent is $2400 so renting will be a good idea THEN. In 15 years the same property will require a mortgage of $4200 while they can rent for $3700, so renting will be a good idea then as well.

Then after 20 years of renting they'll accuse people who have tons of equity in their houses of being "lucky" to have bought before a price run up or two. Uhhhh no.

I'm more than happy to live in a house I love, even if it costs a little more now, knowing that I am cheapening my living costs over time with inflation, while rent increases in urban areas generall run a point above inflation, so renting gets more expensive all the time.[/quote]

You have to consider ROI of your downpayment amount as well as the monthly rental savings to compare.

Anonymous wrote:Also, when you say buy, what exactly do you mean? My husband and I live in a great apartment in Old Town now - no chance in hell we could afford to live here if we wanted to buy.

Let's leave aside the other reasons we wouldn't buy at the moment and only consider that: at least as far as we can see, we'd have to move either to a part of town where we don't want to live, or else to an apartment we wouldn't want to live in, if we were to buy.

What would you recommend we do?

op would tell you life is not fair, buck up, and compromise on attributes until you can afford to buy.

or start making more money.

Anonymous wrote:PP again. And I actually look forward to the time in the not too distant future where the renters in my two rental properties no only pay off those two mortgages every month, but also the mortgage in my primary residence as well.

But then, I'm a sucker.

+1