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Todd Paulding, Renter in Spring Hill, FL

renting vs buying in recent downward spiral in housing market which, is better

Asked by Todd Paulding, Spring Hill, FL Sat Jul 23, 2011

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Here is what I tell my clients. We can only made a decision based on today because the magic crystal ball is always cloudy.

So if you find a home which suits what you are looking for, you can afford it, you feel stable in your job and that you will enjoy living there for a while then you make a decision based on your reason for buying for today.

The mind set of people have changed from the way people purchased homes years ago. They saved their money, bought a home, raised a family and then their either sold or the kids got the home. Then it turned into a speculative purchase such as a stock market. Now buyers are weighting risk. Yes. weigh risk, but keep your reason for buying in mind.

Interest rates have stayed below 5% for a while and that is awesome. Keep in mind that in 1980's and early 1990's interest rates were double digit 10% to 11% double what they are now. For every 1% that interest change that is about a 10% hit to buying power. You need to make 10% more income, you pay 10% more for the home.

You can also talk with you tax adviser and ask if it make financial sense for you in any tax deductions.

All the best in your decision.
Web Reference: http://www.terrivellios.com
1 vote Thank Flag Link Sat Jul 23, 2011
This question is asked a lot. Whether it's a good time for YOU to buy a home depends on your answers to a number of questions.

For example, why do you want to purchase a home?
Is it because you think owning a home is a good investment?
Or the payments will be cheaper than the rent you are currently paying?

Owning a home means you have more control over what you can do with your residence -- you can hang whatever you want on the walls, remodel, change the landscaping, etc. However, you the homeowner are also responsible for all maintenance to that home vs notifying the landlord that there's an issue. Roofs, AC/heat, electrical or plumbing problems can all take a big bite out of your savings. You need to weight the benefits of home ownership vs the benefits of renting for your personal circumstances.

What are your long term goals in purchasing a home?
Do you plan to live in it for years, raise a family there?
Or are you hoping to cash out and turn a profit as soon as home prices rise sufficiently?

Your answers could have an impact on the size of home you purchase, the location, even the type of loan you will need.

Along the lines of that question, how long do you plan to stay in this location?
Do you think your job or other commitments may lead to your moving in a year or two?
If so, renting may be a better option than buying and having to resell in a rather short period of time.

Do you have enough cash set aside to purchase a home? Money to cover a down payment, closing costs, homeowner's insurance, etc? Do you have cash set aside for emergency repairs that may come along after you buy a home?

When you are comparing buying vs renting, are you calculating in the taxes and insurance with the monthly payment should you buy a home? Don't forget the "hidden costs" of home ownership when comparing the two options.

If you are getting a mortgage, have you sat down and gone through the numbers with a lender? What type of loan do you qualify for? FHA, VA, conventional? What are the estimated closing costs? How much money does the lender require you to have in your savings at closing as reserves?

What kind of home do you want? Neighborhoods? School districts? Nearby amenities? Can you afford at this time to purchase the type of home in a neighborhood that meets your desires? If not, are you willing to compromise on the home/neighborhood to stay within your budget?

2014 may be the right time for you to buy a home, depending on your answer to the above questions. If you think your decision through carefully and get your finances in order before you purchase a home, you are more likely to have a positive home buying experience.

Best of luck to you, whichever way your decision ultimately leads you.
0 votes Thank Flag Link Wed Sep 24, 2014
You should buy! A mortgage can be cheaper than rent. I can help you find the perfect house at the right price!
0 votes Thank Flag Link Wed Sep 24, 2014
Renting is fine. But!!!!! If you have the money buying is still supreme. The prices are perfect for making that investment. Put this way, you are at the bottom of the market right now in pricing and there are great deals out there. Even if it takes another year or two for the market to make an upward move, your money will eventually rise with the value of the home when the market makes its comeback. Yes it will come back soon, you have a large group known as baby boomers that want to be in warm sunny Florida and they will make their move soon to buying homes here again!
0 votes Thank Flag Link Mon Feb 27, 2012
0 votes Thank Flag Link Sat Jul 23, 2011
Todd. To me it has not so much to do with prices of the homes, but the rate of interest. Go get a mortgage calculator http://(www.mortgagecalculator.org/) take 200,000 at 4.5%. Then assume you can buy later at 10% off (180,000) but at 6% interest . Which has a better monthly payment? With the Feds doing QE1 and QU2 and not taking about QE3 - Rates have no place but up too go.
You can fool around with different numbers and make your own judgment.

Best of luck.

John
352-978-4539
0 votes Thank Flag Link Sat Jul 23, 2011
How much lower can it go? It's a perfect time to buy!
0 votes Thank Flag Link Sat Jul 23, 2011
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