Tim - In the short term (1 to 3 years) you maybe better renting. This is because the costs of selling a house in that short a time period can be greater then the property appreciation. You'll likely pay 3% to 5% when you sell in fees and commissions.
If you stay longer then 3 years, you'll start to see appreciation in the property (hopefully, but appreciation is never a guarantee) that would cover any selling expenses and put a profit in your pocket.
Also, consider the tax benefits of buying. Talk to your accountant and see what tax savings you might qualify for by owning a house. Deducting the interest can have a very positive impact on your taxes. I would recommend going to your accountant and say "How would my 2007 taxes have been different if I had owned a house" so you can see how it impacts you.
If you want a $1000 monthly payment, you'll need to plan on around $800 for principle and interest (P&I), and another $200 for taxes and insurance (T&I). These are approximate numbers, your lender can give you a better estimated. But based upon an $800 P&I at 6% interest you would borrow around $135,000 which would put you in the $175,000 to $185,000 price range. You'll need to budget closing expenses. Ask your lender for a GFE (Good Faith Estimate) and it will show an estimate of your monthly payment, and the expenses for closing.
Be careful with a condo. They have condo fees that cover maintenance that can run $100 to $200 or more a month. This money is pooled with all the other condo owners to maintain the buildings and grounds. You also run the risk of special assessments which may be assessed to cover one time major expenses when the monthly fees donâ€™t cover an expense. This happens sometimes when roofs or siding need replacing, and it costs more to do then the condo fees have saved up. They assess every unit a fee, which you are required to pay. This can be expensive, in the thousands of dollars. This is one of the risks of owning a condo (or townhome.)
Also, look at it like this. If you rent for five years, and pay $1000 a month, over the five years you will have paid $60,000 in rent. Taking your $40,000 down payment and get a 3% return would get your approximately $46,000 for a total gain of $6000 renting. If you owned the house, and paid $175,000 for it, if it appreciates 3% a year, after five years it would be worth around $200,000 and youâ€™d have paid down the principle to around $125,000 (according to a amortization program on fsu.edu) which would give you $75,000 in equity based upon your $40,000 down payment, a gain of $35,000 before any tax gains, which is $29,000 larger gain over renting.
These numbers are all estimates and approximations, and nothing is guaranteed. Talk to an accountant to determine tax benefits to owning.
I hope my brief novel has helped answer your question, please let me know if you need more info.
Triangle Realty Info, Inc.