Why renting is better then buying right now

[Science Abuse]

All these assumptions that the most basic of rules apply all the time. It's cute seeing people make statements oblivious to variables and the fact that consumers are stupid. You may be right about Columbus being a bright shiny point of hope in a gloomy real estate abyss....but no one cares. Just like any market that takes a poop, people will be leary of it for a period of time afterwards. In this case, the afore mentioned people aren't seasoned brokers or traders. They're regular joes who skim the papers without reading or understanding them. They see "Housing slips more OMG", and think "wow, my Realtor/loan officer/mortgage guy must be BS'ing me like all those ones I saw in the paper last year.

The "general relativity" of market patterns goes to hell when you ad in the "quantum mechanics" of buyer psyche.

 

But, lets wait and see. I'd make a bet that I'm right, but I'm already wagering my hard earned buck on it.

[jeffmeden]

No, that was a rough figure (round number) based on the commonly advertised range of monthly payments. $1041 being intrest and principal, if any principal is actually paid. The math was meant to show total money in the toilet, including what the bank gets from you.

Where exactly did you get $1325 + $1041 from 6%? That doesn't make any sense at all.

 

You said $25,000 of the principal was paid down in 24 months, remember?

Purchase price: $275,000

minus Downpayment: $10,000

minus 24mo of payments: $25,000

equals You owe $240,000

 

(math mine for emphasis)

 

Thats 1041 a month to the principal, plus the 1325 which is a month's worth of interest that you owe the bank for the privilege of borrowing that much money. This is what a typical 15 year mortgage will be at current interest rates, a total of $2300 a month. Note that this is before taxes and insurance, the bill from the bank will probably be closer to $2700/mo depending on the locality. If you didn't mean to say that, then you should rethink your math. You can't borrow money without paying it back.

[LJ]

All these assumptions that the most basic of rules apply all the time. It's cute seeing people make statements oblivious to variables and the fact that consumers are stupid. You may be right about Columbus being a bright shiny point of hope in a gloomy real estate abyss....but no one cares. Just like any market that takes a poop, people will be leary of it for a period of time afterwards. In this case, the afore mentioned people aren't seasoned brokers or traders. They're regular joes who skim the papers without reading or understanding them. They see "Housing slips more OMG", and think "wow, my Realtor/loan officer/mortgage guy must be BS'ing me like all those ones I saw in the paper last year.

The "general relativity" of market patterns goes to hell when you ad in the "quantum mechanics" of buyer psyche.

 

But, lets wait and see. I'd make a bet that I'm right, but I'm already wagering my hard earned buck on it.

 

I will wager you that in the next 5 years that prices in Columbus rebound HARD and people will be sitting on assloads of equity. Hell, a portion of my income already is wagered on it!

You may have a few years on me in life, but I have been around real estate for a long time. I made my first real estate investment decision back in 1998 when i was 13, yes, 13, and have never looked back. I have been studying the markets for a LONG time. Columbus is nothing more than a surplus.

[LJ]

Note that this is before taxes and insurance, the bill from the bank will probably be closer to $2700/mo depending on the locality.

 

Or you can be smart, close at the end of a year, get all closing costs and pre-paids paid by the seller, put that property tax and insurance money in a high yield savings account and beginning the next year start paying it in cash by half. Too bad more people aren't disciplined enough to do that....

 

 

lol

[Tractor]

Its cute that you stated that there will never be a housing (price) bubble like then again. If I have to I'll post the housing vs income chart for the last 150 years. This is just another low point in the cycle. Just driving out of columbus from downtown on high street you can see the grow rings of the city. You have its founding and then you get into the victorian era and then back to alot of small close together houses again. Then you hit another round of larger homes with garages, yards/land scaping, and privacy and then back into slightly smaller ones again before hitting the modern day 2000sq ft+ homes. My first house in westerville sold over 30K new then hit an all time low of 19K before steadily rising after early 80's. I bought it for 108K and sold it for 128K 5 year later at the top of the climb. That area of westerville its sad to say has probably seen its highest point and now those homes are getting pretty small and old.

Cycles are Cycles.

If I wanted to make extreme profit I probably should have sat in an apartment for another 1.5 years or so and then built my next home, but at least I got a great rate and built up in Marengo where I can already see more sub divisions being installed so I'll probably make out okay in the 5+ year time span unless we have something really bad come up.

 

LJ is right on the money, but I'd like to add that Columbus's "something different" that he refers to is basically the news stories people are hearing about the real price bubble that is afflicting the coastal cities. Prices will be fine here once people forget about the news and just buy something.

 

Evan

[Science Abuse]

You said $25,000 of the principal was paid down in 24 months, remember?

LOL, no, but you caught my mistake. I said you paid $25000. I was measuring money spent, not equity earned...so I should have specified, you win that one.

 

(math mine for emphasis)

You're going to need to show me the long math on that $1325 figure. As I work it out, 6% of $1041 is 'bout sixty bucks, and 6% of 275,000 is $16,500 (divided 15x12), which is still not $1325. $1325 monthly interest is $238,000 in interest alone over 15 years, plus $187,000 in principal ($1041/mo).

Consumers are dumb, but even I have a hard time believing that they'd be dumb enough to pay that much to borrow money.

Are you sure you don't mean $1325 payment, $1041 of which is principal?

[Bam]

When I calculate a mortgage of $275k @ 6% for 30 years, I get a payment of $1648.76, and after 15 years you would have paid $218,138.75 in interest and $80,287.52 towards principal, leaving you with a total of $194,712.48 STILL DUE.

 

I dunno where you guys are getting your numbers.

[Bam]

LOL, no, but you caught my mistake. I said you paid $25000. I was measuring money spent, not equity earned...so I should have specified, you win that one.

 

 

You're going to need to show me the long math on that $1325 figure. As I work it out, 6% of $1041 is 'bout sixty bucks, and 6% of 275,000 is $16,500 (divided 15x12), which is still not $1325. $1325 monthly interest is $238,000 in interest alone over 15 years, plus $187,000 in principal ($1041/mo).

Consumers are dumb, but even I have a hard time believing that they'd be dumb enough to pay that much to borrow money.

Are you sure you don't mean $1325 payment, $1041 of which is principal?

 

Also, you don't even start paying down any noticeable principal for the first 5 years at least, I'd say. 85-90% of your payment is usually interest for a good while. Very little is applied to principal.

[thorne]

I read your whole post, no need to quote it all..

 

Anyways, that is the problem. People are treating a home purchase like a high yield investment, which it is not. It is a tax shelter, and it is a safe place for your money. When you do the math, if you can budget correctly and spend the right amount on a house, you come out ahead of renting. You don't pay capital gains, etc.

 

Anyways, people who think right now is a bad time to buy in Columbus are just 100% wrong

Its a bad time to buy if you plan on moving in 5 years .

 

Thats my whole argument there is a breakeven point. It's not 5 years with the current market trend as you will be selling it again while the supply is far greater then the demand.

[thorne]

Also, you don't even start paying down any noticeable principal for the first 5 years at least, I'd say. 85-90% of your payment is usually interest for a good while. Very little is applied to principal.

Its ok they will go into the tax write of the tax. I can tell you its not as great If you don't have a other things to go with it.

 

 

Paid over time I show my first house costing over 400K if I would have stayed there.

 

The house cost me 145K to buy. The first year IT was worth 150K second 140K third when I really really needed to get out because it was a issue in my divorce. It was worth 138K. Now in this time my pay off on the loan was still more then that. Explain it.

[LJ]

Its ok they will go into the tax write of the tax. I can tell you its not as great If you don't have a other things to go with it.

 

 

Paid over time I show my first house costing over 400K if I would have stayed there.

 

The house cost me 145K to buy. The first year IT was worth 150K second 140K third when I really really needed to get out because it was a issue in my divorce. It was worth 138K. Now in this time my pay off on the loan was still more then that. Explain it.

 

You didn't put enough money down, saturated market, bad rate, etc etc etc

 

jesus, 100% financing at 8% gets 383,000

[Bam]

Its ok they will go into the tax write of the tax. I can tell you its not as great If you don't have a other things to go with it.

 

 

Paid over time I show my first house costing over 400K if I would have stayed there.

 

The house cost me 145K to buy. The first year IT was worth 150K second 140K third when I really really needed to get out because it was a issue in my divorce. It was worth 138K. Now in this time my pay off on the loan was still more then that. Explain it.

 

That's just stupidity there, no offense man but you didn't deserve or even make enough to buy a home then. I'm not sure how you came up with 400k after 30 years, but if after 3 years of payments on your house you paid $145k for you still owed OVER $138k and you had a FIXED rate mortgage, like you said you did earlier, then you either didn't put JACK SHIT down, or just got royally fucked on your rate.

 

When did you buy this house? What was your amount financed and what was your interest rate? Just curious. Because in the past 3-5 years rates have been AWESOME.

 

My dad has 4.25% on his 500k mortgage, that he bought in 02/03. I'm going to get about 6.125% or 6.25% and I am putting the full 20% down.

[Bam]

You didn't put enough money down, saturated market, bad rate, etc etc etc

 

jesus, 100% financing at 8% gets 383,000

 

8%+ I can't imagine paying that much on anything, shit my car loan on my used car is only 6.1%. I told myself I wouldn't purchase anything at over 7%, its just not feasible. For houses that is. But then again anything really, much more interest than that and I would just buy a cheap, used car and pay cash, after 6-7% it's just stupid to finance.

[LJ]

8%+ I can't imagine paying that much on anything, shit my car loan on my used car is only 6.1%. I told myself I wouldn't purchase anything at over 7%, its just not feasible. For houses that is. But then again anything really, much more interest than that and I would just buy a cheap, used car and pay cash, after 6-7% it's just stupid to finance.

8.5 nets 401k in 30 years....

 

plain stupidity

[Bam]

What does 6.5% on 75k net in 30 years? Just curious for myself.

[LJ]

What does 6.5% on 75k net in 30 years? Just curious for myself.

 

 

170k

 

a loan that small needs a 15 yr mortgage.

 

You are paying half and half in your 5th year on a 15 yr mortgage on one that small.

 

You are paying half and half in your 20th year on a 30 year mortgage of that size

[Bam]

170k

 

a loan that small needs a 15 yr mortgage.

 

You are paying half and half in your 5th year on a 15 yr mortgage on one that small.

 

You are paying half and half in your 20th year on a 30 year mortgage of that size

 

Well, seeing as how the rate doesn't change to benefit me I'd like to take out a 30 year fixed, and just make the 20year payment or something.

 

2 reasons, one, I'm not going to live here forever, and 2, I'm still a full time student and work full time, so money doesn't exactly fly in, you know?

 

And if I could afford the 15 year payment + the higher taxes of a house, I'd own one instead of considering a condo.

[jeffmeden]

Sheesh, for a bunch of smart guys you all sure have a hard time grasping this.

 

If you borrow $265,000 at 6% apr, the monthly interest will be 265,000*(.06/12)=$1325. This should be obvious to anyone familiar with a calculator.

 

If you plan on paying it off, you need to put principal down too:

$2236 a month for 15 years, which (at first) is 1325 in interest and 911 in principal.

$1588 a month for 30 years, which (at first) is 1325 in interest and 263 in principal.

 

Any more questions?

[slow4now]

Houses make mediocre investments, generally barely outpacing inflation.

[Supplicium]

take a look at this link, this calculator is missing a few variable but gets the main point across.

 

http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html?_r=3&ei=5070&en=5d50496ada0f2438&ex=1178942400&adxnnl=1&oref=slogin&adxnnlx=1190337317-FTRBbN6moQeLQED4NwNbWQ&oref=slogin&oref=slogin

[thorne]

That's just stupidity there, no offense man but you didn't deserve or even make enough to buy a home then. I'm not sure how you came up with 400k after 30 years, but if after 3 years of payments on your house you paid $145k for you still owed OVER $138k and you had a FIXED rate mortgage, like you said you did earlier, then you either didn't put JACK SHIT down, or just got royally fucked on your rate.

 

When did you buy this house? What was your amount financed and what was your interest rate? Just curious. Because in the past 3-5 years rates have been AWESOME.

 

My dad has 4.25% on his 500k mortgage, that he bought in 02/03. I'm going to get about 6.125% or 6.25% and I am putting the full 20% down.

 

 

I am pretty sure it was 138K I could be off since that was in 03. I could find out I will try some time. I was exxegerating as the point is It was Worth less then i owed. Yes I put 0 down as I was told using a FHA Loan as a first time buyer it was better for me to use a something gift. Its been a few years. I was locked in at 6% btw my CR was over 700 at that point. I got the best possible fixed rate I could. I had a 2-1 buy down. But I did put 0 down as I was told that was how I should do it by my realitor and since i grew up with parents who could not manage monopoly money. I only knew what I was told

 

I had to prove I had the money to put down and I got some gift. I forget how it worked. If you want I can show you my earning statements. Maybe because you don't make money now you think I did not but I was making well over 36K at 19.

 

 

I know a shitload more now. I relize putting down 0 was stupid.

 

I also don't like you claiming I should not make X. It's a fucking insult that you mister low ball would talk shit about me. I'm sorry I did not know money back then But I did know IT and thats why I'm a engineer now. So I would ask that you retract your statement as we've always been cool on a persoonal level but I don't take to personal attacks well.

 

lets see how I came up with 400K

I paid 1119 a month with TAX/PMI

402840.

 

For you since I'm soooo stupid let me show you my math

 

 

12*1119*30=Y

[thorne]

that calc tells me I can live were I am for 5 years before it even benfits me to not rent.

 

 

Matt, Look at that calc. You will see what I'm saying.

[LJ]

I am pretty sure it was 138K I could be off since that was in 03. I could find out I will try some time. I was exxegerating as the point is It was Worth less then i owed. Yes I put 0 down as I was told using a FHA Loan as a first time buyer it was better for me to use a something gift. Its been a few years. I was locked in at 6% btw my CR was over 700 at that point. I got the best possible fixed rate I could. I had a 2-1 buy down. But I did put 0 down as I was told that was how I should do it by my realitor and since i grew up with parents who could not manage monopoly money. I only knew what I was told

 

I had to prove I had the money to put down and I got some gift. I forget how it worked. If you want I can show you my earning statements. Maybe because you don't make money now you think I did not but I was making well over 36K at 19.

 

 

I know a shitload more now. I relize putting down 0 was stupid.

 

I also don't like you claiming I should not make X. It's a fucking insult that you mister low ball would talk shit about me. I'm sorry I did not know money back then But I did know IT and thats why I'm a engineer now. So I would ask that you retract your statement as we've always been cool on a persoonal level but I don't take to personal attacks well.

 

lets see how I came up with 400K

I paid 1119 a month with TAX/PMI

402840.

 

For you since I'm soooo stupid let me show you my math

 

 

12*1119*30=Y

 

Your tax and PMI is not part of your investment on your house. Do not say that you were going to pay 400k on your loan because that is incorrect.

 

Your loan was going to cost 312k

[LJ]

Well, seeing as how the rate doesn't change to benefit me I'd like to take out a 30 year fixed, and just make the 20year payment or something.

 

2 reasons, one, I'm not going to live here forever, and 2, I'm still a full time student and work full time, so money doesn't exactly fly in, you know?

 

And if I could afford the 15 year payment + the higher taxes of a house, I'd own one instead of considering a condo.

 

Once again, borrowing such a small amount at 30 years does not benefit you.

 

On a 15 yr mortgage your payment is 674/month compared to 474 at 30 years

 

plus after 5 years with a 15 yr you have almost 20k of extra equity in the home

[TTQ B4U]

exactly....and what's with folks only paying the minimum on the loan? pay off your cc debt and start paying down the house faster if you want to pay less for it in the end.

 

balance things out already....invest money in the market, and other long term vehicles and if you are buying a house, don't buy the most you can ever afford and become cash poor, buy what is below your means, give yourself some cushion and pay into the home at least a few bucks more each year. It doesn't take much extra to start knocking years off the loan.

 

 

Once again, borrowing such a small amount at 30 years does not benefit you.

 

On a 15 yr mortgage your payment is 674/month compared to 474 at 30 years

 

plus after 5 years with a 15 yr you have almost 20k of extra equity in the home