buying a house..... or not.

[lovegem]

I need some advice from the wise PS''ers. I know some of you have been following the housing market for some time and seem to have some idea of where it is going. So I need some perspectives here.

We live in Philly and currently renting. The price in the areas that we have been looking has come down 10 - 15% since the downturn. We are budgeting to buy a house that would result in us paying approximately the same as our rent (maybe ~$200 more the most). I would not hesitate to buy now if we are staying in this city for at least 5 more years. Fact is, we are looking to move in the next 3 years. I would be scared if the market continues to go down in the next year or so and us underwater, because it would not allow us to have enough time to wait for the market come back up to get even. Plus, we are buying in the suburb, it may not be that easy to rent out if needed to. Moreover, the cost of selling the house may be quite a bit to swallow too. BUT... if we buy now, we are eligible for the $8000 first time home buyer credit. If we move out in 3 years, we do not have to pay this back. If we end up moving out earlier, we will have to pay it back. What do you think?

 

[Octavia]

FI and I are in a similar position (and also in Philly) and we''ve pretty much decided to stay put. We may or may not be there for a few more years, and don''t want to take the risk of buying and then having to try to unload a house if we go. If we decide to stay, then we''ll look at buying. There''s less of an impetus for us because we''re either partially or completely phased out of the first-time homebuyer credit (won''t know for sure until tax time) so it''s not as big a financial decision for us to pass it up, but I feel much more comfortable this way. FWIW, the place we rent right now is owned by a friend who couldn''t sell when he moved, so that
may affect my perspective...

 

[TravelingGal]

Buying because of a 8K tax credit is not a smart move. I don''t know what home prices are like out there, but in my neck of the woods, it''s 600K. It can fall 8K easily, so there goes that tax credit.

In your situation, I would not buy, but I don''t know your market so it''s hard for me to definitively say.

 

[Mara]

Given that you are thinking of leaving in the next 3 years and what you wrote about the cost of the house potentially being too much given housing instability, I''d say to wait. Not sure what pricing you are looking at but we have looked at suburbs in Philly and 300k or so is not a bad average right? In that case, I agree with TG that the 8k is a drop in the bucket against a house cost. When does the tax credit end...could you ride it out for a bit longer and gather more information for the rest of this year?

 

[rainwood]

If you are planning to move within 3 years, buying a house is probably not your best option. Not only do you have to worry about prices continuing to drop, you also have to recoup the associated expenses of buying/selling just to stay even. These expenses would include closing costs when you buy, real estate commissions and any excise or other taxes payable by the seller when you sell. So you''d have to weigh those expenses against the $8000 credit and the value of the mortgage interest deduction for the years you own. You should also factor in property taxes paid, repairs and maintenance (maybe even some utilities) you wouldn''t be paying for in a rental, etc. Only you can do the math on that, but my guess is it would be hard to recoup all of those expenses in 3 years in a down market or even a flat one.

 

[lovegem]

Thanks Octavia, TG, Mara, and Rainwood.

I guess I just need someone to confirm to me buying is not a good idea for us now.