Continue to rent or buy a house?

[Octavia]

I also love the NYT rent-vs-buy calculator! It's not perfect in this kind of situation, though. The problem is that it assumes that the house you are thinking about buying is similar to the house/apartment you are renting, so you might have to do a couple different calculations and compare apples to oranges a bit. For example, in my situation, DH and I would never buy a property similar to the apartment we rent (1br/1ba/~700sf), we would "trade up" to a larger, multi-br, multi-ba home. If I put in our current stats and what the probable sales price of this unit would be, it says it would take 27 years for buying to be a better option. But if I put in the rental and purchase costs for a place similar to what we'd actually buy, it would be less than 4 years until the tipping point. HOWEVER, we're still saving a ton of money each month by staying in a smaller place and renting until we really need a bigger place, I just couldn't figure out how to calculate when the optimal time to purchase would be. I just wanted to mention this in case geckodani hasn't put in all the info yet, because even though it's super helpful for the larger picture, you might not be able to tailor it to your situation as much as you'd like...

 

[janinegirly]

NYT tool is great, but agree with Octavia--it is only a loose guideline. As she points out the place you are renting is likely not the place you buy and expand your family. Then there is the factor of location, school disctrict and upgrades you make to the place after purchase. But as an initial tool--it is v. useful and good to hear we technically only need to be there 4 more years (assuming all else is equal,same house/location/price point neighborhood). But again, we'd never pay as much rent as our current house would require vs. the mortgage.

 

[geckodani]

Sorry, didn't mean to post and run. I've been sick all weekend.

It is true that the house we are looking to purchase is siginificantly larger/more expensive than our apartment, so that is being taken into consideration as well. I truly appreciate all the insight you all have provided! I'm going to look at a few more properties tomorrow, but am comfortable waiting until we find the right home.

 

[NewEnglandLady]

Hey, Gecko! I wasn't going to post since I was so late to the thread and you've gotten good advice. I've been wondering how you're doing since your days in the House Hunters thread!

I can relate to your situation in many ways--feeling pressure to buy because of the market, knowing kids are on the horizon, facing the fact that your mortgage payment will be much higher than rent, wanting more of a "forever" house than "starter" house, etc.

If I were in your shoes, I would continue to rent for maybe another year and I'll tell you why:

1. Your husband just got his job, so use that as a springboard to hoard your money and get used to the new income. And who knows, he may get a raise within the next year that might open up more options!

2. Obviously low rent = more savings! When we knew we were on the cusp of buying, we decided to rent in one last town for a year (month-to-month). It actually turned into nearly two years because it took us 8 months to find a house, but the longer we rented the more we could save. The house we could buy using that year of savings was nicer than the house we could have bought without it! And even if you wanted to get pregnant in the next year, it still gives you time.

3. The market is not rebounding anytime soon. In fact, I feel like prices keep getting lower. And I've heard the same rumor about more foreclosures flooding the market. As for inerest rates, while I do think it would be better for the long-term health of our economy if they started going up, I just don't see how that's going to happen. Obviously the FED doesn't regulate mortgage interest rates, but they follow the same trend and I just don't see how rates will go up in this economy.

4. And finally, for all of these reasons (bigger downpayment, possibly higher salary and decreasing housing costs) it may very well be the case that in a year, you could afford something more along the lines of what you want than is in the budget today without having to push back your family timeline.

Good luck!

 

[geckodani]

Hi NEL! I haven't popped back into the HH thread - I feel bad not being able to keep up with all the posts and I've been so conflicted about the whole thing. Your post is pretty much spot on to what we've decided. Solid advice as usual. I'm still looking for the next month or so, because it would be silly not to, but I'm really, REALLY leaning towards renting for another year - for ALL the reasons you outlined below!

Especially since we're managing to sock away a nice chunk of change every month, if we rented for another year we'd have between 12-20K additionally to put down on a house, which could potentially push us out of FHA financing and into a more traditional mortgage, which would be nice considering the .5% PMI required for FHA mortgages.

ETA: Regarding the new job, DH is still settling in, and I think lives with this constant fear that it's just going to go away. I can't really blame him, but maybe another year will help convince him that the job isn't going anywhere for a while!