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I want a house, but.. - 7/20/2010 12:02:44 AM
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ColoradoLady38
Posts: 374
Joined: 8/11/2008
From: Somewhere near Pikes Peak
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I am afraid it wouldn't be conducive given the state of the economy. I know the market is down for now, but when/if it comes back up, will it come back to kick me in the teeth? I do work full time as a CNA, and also have VA benefits that I could also use to get a house. Back in 2002 I bought a house with my then husband, since our divorce in 2007 I have signed a quit claim deed, and he refinanced the house in his name only. So my name is clear of that responsibility. What is your take on how the state of our country is going, and a first time (again) home buyer. Do you think it's a good idea for my 3 children and I?
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RE: I want a house, but.. - 7/20/2010 9:08:36 AM
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peace77
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Don't buy a house because of what the economy is doing or not doing.
Buy based on your need and ability to afford a home.
You need a place to live and for some people a rental is not suitable.
With the VA benefits, can you afford a home? Housing costs (mortgage, utilities, insurance and taxes should be less than 40%)
This could be considered a good time to buy due to low home prices and low interest rates.
However, CNA's do not earn much, can you afford to pay earnest money, down payment and closing costs?
Have you researched home buying grant funds in your area?
Is there any possibility that you could earn an LPN or RN license? Some hospitals will pay for their employees to go to school if they will work for the hospital after they graduate. In our area, there is a need for dialysis techs, that is another avenue to consider.
With the average age of Americans increasing, there is an increasing need for healthcare workers. You will probably never be out of a job.
If you do decide to buy a home, do NOT spend all of your savings to do so.
You will still need to have an emergency fund of at least 6 months worth of expenses to cover emergencies.
I have seen it happen that a family spends all their money to move in and can't afford to replace the water heater when it breaks their first week in the house.
Your spending for housing costs should still allow you to put money into savings each month for future needs such as home repair and maintenance.
Appliances do break and need to be replaced.
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RE: I want a house, but.. - 7/20/2010 9:21:16 AM
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creationtalk
Posts: 380
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Agree with peace77 that buying a house should not be decided based on the economy but rather on your need and ability to pay.
That said, if your job is secure, this would be a good time to buy if 1) you can afford to (figure in utilities--past yearly cost X 1.5, insurance (plan on it going up), taxes, and home repairs--particularly with an older home, and 2) you get a fixed-rate, simple interest, mortgage (as in interest is based on your current principle balance, not amortized over some period of time, where you pay a fixed amount of interest even if you pay the home off early). Rates are relatively low right now, so if the economy picks up and mortgage rates go with it, then you have locked in a good rate.
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RE: I want a house, but.. - 7/20/2010 10:05:32 AM
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Simway
Posts: 321
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There are pros and cons to owning a home. Take you time, think about it. Sit down with pen and paper, write out the pros, and cons. Be honest with yourself, be sure you can afford the payments, utilities, up keep, insurance, everything that goes into keeping a home going.
One thing , if you rent, when you come to the end of your lease, will the Land lord allow you to stay? If not then theres the hussle of finding a place you can afford, and that allows children. Also if you can stay, will the rent go up , and if so how much?
One thing if you buy, be sure to get the house you are interested in , inspected. It will cost you , but it could bring to light problmes you just don't see when you look around.
Hope some of this helps, and as the old song says, " Look before you leap, still water runs deep."
Simway
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RE: I want a house, but.. - 7/20/2010 2:01:02 PM
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GroupW
Posts: 2958
Joined: 11/16/2007
From: Up in the hills of Colorado (very BIG hills...)
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quote:
ORIGINAL: ColoradoLady38
I am afraid it wouldn't be conducive given the state of the economy. I know the market is down for now, but when/if it comes back up, will it come back to kick me in the teeth? I do work full time as a CNA, and also have VA benefits that I could also use to get a house. Back in 2002 I bought a house with my then husband, since our divorce in 2007 I have signed a quit claim deed, and he refinanced the house in his name only. So my name is clear of that responsibility. What is your take on how the state of our country is going, and a first time (again) home buyer. Do you think it's a good idea for my 3 children and I?
Think of buying a house as a lifestyle decision and not as an investment. It's really a luxury purchase, not a basic need. I've run the numbers a bazillion times (an exaggeration - maybe only half a bazillion) and renting is nearly always a better financial decision. So, all the rules of a luxury purchase apply - make sure you can afford it and that other more basic needs can be met.
Off my soapbox now...
That said, housing affordability is at fairly good historical levels right now based on home price declines and low mortgage rates. If you decide that owning a home for your family is what you really want to do, now is not a bad time to do it. You also shouldn't feel like you need to be in a hurry. Low interest rates are likely to persist for another year or so, and home prices are not likely to rise much over that time period either.
You're heading into a good time to buy - fall and early winter tend to see home prices drop a bit. There is a strong seasonal component to home sales that peaks in the spring/summer.
Also, in our neck of the woods up and down the front range, people will often tell you not to worry about a soils test. Don't believe them. There are some very large deposits of bentonite soils around the base of the foothills and into some of the valleys. Bentonite soils can tear up a foundation in a very short time period. If you're familiar with some of the neighborhoods up and down Rampart Range, you can literally see the problem where the roads have bucked and heaved. Unless you are obviously built on rock, I'd do the test.
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"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: I want a house, but.. - 7/20/2010 2:47:59 PM
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EsonTheSearcher
Posts: 634
Joined: 4/25/2009
From: Homer, GA
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quote:
ORIGINAL: ColoradoLady38
I am afraid it wouldn't be conducive given the state of the economy. I know the market is down for now, but when/if it comes back up, will it come back to kick me in the teeth? I do work full time as a CNA, and also have VA benefits that I could also use to get a house. Back in 2002 I bought a house with my then husband, since our divorce in 2007 I have signed a quit claim deed, and he refinanced the house in his name only. So my name is clear of that responsibility. What is your take on how the state of our country is going, and a first time (again) home buyer. Do you think it's a good idea for my 3 children and I?
(1) As mentioned, buy a house on your ability to pay. If you can't afford stay 100 miles away from it.
(2) Contrary to what the "American Dream" tells you, you can have a life without a house. A lot people (esp older people like my grandmother) cannot understand that buying/building is a house is a lot more expensive then it was 40 years ago! My grandmother constantly rode me and my wife after we got married by a house: "it's an investment...", "it only cost me and your grandaddy $20k to build this house in 1968..". I would reply with "An investment is something you don't have to pay back and costs of building were less in 1968...". The "American Dream" will bankrupt you if you are not careful.
(3) The really bad part about buying a house is...well...you have to pay for it. Whether you live in it or not. My mother took a job with a temp medical again back in 2005. From Jan of 2005 until Sept 2009 she traveled all over the US...including two stays in Alaska. She made tons of money, but she had to pay $800 a month on her house for nearly 5 years and only lived in it for a total of two months.
(4) The good about renting is if your financial situation changes for some reason, you can pack up and leave and make other arrangements. That is exactly what my wife and I have to do some years ago. When you sign that loan, you are stuck with it.
(5) If you by a house, two things:
a. Make the biggest downpayment you can.
b. Don't do like my mother did and sign a 30yr mortatge when you
are in your fifties. Now she will have to work to pay for it until
she is 80 something. And it will never happen.
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RE: I want a house, but.. - 7/20/2010 4:48:22 PM
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APZR
Posts: 1002
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From: GA
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quote:
Think of buying a house as a lifestyle decision and not as an investment. It's really a luxury purchase, not a basic need. I've run the numbers a bazillion times (an exaggeration - maybe only half a bazillion) and renting is nearly always a better financial decision. So, all the rules of a luxury purchase apply - make sure you can afford it and that other more basic needs can be met.
GroupW, I'd sure be interested in what data you have. I can see where renting is better than buying in areas of transient employment, areas where business is largely tourism based, areas of flat or even negative appreciation, and when one plans to live in an area less than 5 years. But to just state generalities that renting is better over all is not considering other economic factors such as growth in ones own income, privacy you don't have in a leasehold estate, pride in achieving something significant of value (which granted is an emotion, but does have some financial value), and future income benefits such as rent. Our own previous houses are rented; as we've advanced in our life and career, I kept the old house and rented it. Sometimes I do recommend people rent, but overall if you can afford the payment, upkeep and taxes, it's definitely advantageous to buy in a growing market. There are micro-markets where I would never buy. Some towns in GA have negative growth and have not appreciated in value in the past 15 years, definitely rent. But where we live, our area is 10th in the nation for growth and prosperity. Values are going up even in this economy.
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RE: I want a house, but.. - 7/20/2010 5:03:40 PM
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GroupW
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Every time I've run the numbers, it's turned out that way. There are some markets which have had abnormally high growth rates over the past decade or so (CA, AZ etc) but over time home prices tend to mean-revert back to a growth rate that's just slightly over the inflation rate.
What I have found is that most people underestimate the true cost of ownership by underestimating real maintenance costs and overestimating the useful lives of such things as roofing, windows, water heaters, etc.
It's also true that one's investment preferences factor into the equation. For very risk averse people who do the equivalent of keeping money in a mattress by socking it all into money funds, the renting advantge is typically small. More aggressive folks that are disciplined about saving the difference between the rent and the home ownership cost can see a much bigger benefit to renting.
Big caveat: When I run these numbers, I'm assuming that a person isn't renting the equivalent amount of space but is doing an apartment/townhome instead. I should have been more clear about that.
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"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: I want a house, but.. - 7/20/2010 5:07:12 PM
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GroupW
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Forgot: if you have access to Bloomberg, it has a really good buy/lease calculator that I've used. I also tend to rely a lot on some historic home price data fro
MGIC and Fitch. There are also some really good academic articles on mean reversion in home prices that I could see if I still have somewhere.
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“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: I want a house, but.. - 7/20/2010 5:34:23 PM
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christsstar
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I'm subscribing to this thread as I am very interested in it. Some very good comments so far, that are giving me things to think about when Dh and I are ready.
However, I, too, am curious about the specifics of renting being more economical. I hate paying $2000/month toward something and not having anything to show for it. However, living in the house where we live, I cringe at ownership. Our landlord has put it probably close to $20,000 worth of repairs in the last 2 years due to her father's lack of proper upkeep.
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RE: I want a house, but.. - 7/20/2010 5:44:13 PM
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EsonTheSearcher
Posts: 634
Joined: 4/25/2009
From: Homer, GA
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quote:
ORIGINAL: christsstar
I'm subscribing to this thread as I am very interested in it. Some very good comments so far, that are giving me things to think about when Dh and I are ready.
However, I, too, am curious about the specifics of renting being more economical. I hate paying $2000/month toward something and not having anything to show for it. However, living in the house where we live, I cringe at ownership. Our landlord has put it probably close to $20,000 worth of repairs in the last 2 years due to her father's lack of proper upkeep.
The problem is that your house always requires maintence and you are responsible for it. And new buyers generally don't consider that. Your just thinking "I own it if I buy it...". As you said your landlord pays for it, but when you buy a house, YOU pay for it.
As I pointed out, if you get tired of your $2k a month (where on Earth do you live where renting a house is $2 a month?) you can just pack up and leave. And rent is usually cheaper, but all everyone thinks about is "I'm paying and don't on it..."
My mother is wishing now she had never left her little $400 a month apartment and bought her $800-a-month-for-the-next-30-years house.
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RE: I want a house, but.. - 7/20/2010 5:47:59 PM
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christsstar
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quote:
ORIGINAL: EsonTheSearcher
quote:
ORIGINAL: christsstar
I'm subscribing to this thread as I am very interested in it. Some very good comments so far, that are giving me things to think about when Dh and I are ready.
However, I, too, am curious about the specifics of renting being more economical. I hate paying $2000/month toward something and not having anything to show for it. However, living in the house where we live, I cringe at ownership. Our landlord has put it probably close to $20,000 worth of repairs in the last 2 years due to her father's lack of proper upkeep.
The problem is that your house always requires maintence and you are responsible for it. And new buyers generally don't consider that. Your just thinking "I own it if I buy it...". As you said your landlord pays for it, but when you buy a house, YOU pay for it.
As I pointed out, if you get tired of your $2k a month (where on Earth do you live where renting a house is $2 a month?) you can just pack up and leave. And rent is usually cheaper, but all everyone thinks about is "I'm paying and don't on it..."
My mother is wishing now she had never left her little $400 a month apartment and bought her $800-a-month-for-the-next-30-years house.
Bay area. California is PRICEY!!! And with home prices nowadays, that's about equal to a mortgage payment. And we have renter's insurance, so we already have that in the budget, albeit not as much as homeowner's. It's the maintenance that would kill us. So we would really have to look at having maintenance costs available or make sure the house is pristine.
Right now renting works for us, but eventually we'd like to buy so we can modify the house and enjoy it even more.
And the house probalby isn't worth the $2000/month. But with all the upgrades she's doing, we're willing to pay it. We have a new roof, new appliances, 2 new bathrooms, getting a new deck, new windows, new floors. Next all we need is new insulation and central air!
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RE: I want a house, but.. - 7/20/2010 6:27:58 PM
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GroupW
Posts: 2958
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From: Up in the hills of Colorado (very BIG hills...)
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quote:
ORIGINAL: christsstar
It's the maintenance that would kill us. So we would really have to look at having maintenance costs available or make sure the house is pristine.
And even when you think it's pristine, you end up spending way more than you originally expected. Our house was built 9 years ago, but we've spent about $25k so far in maintenance over the past 6 years we've owned it.
$15,000 - refurbishing the deck (Colorado sun & UV is death to wood decks. Did synthetic. Cost 2x as much but will last 2x as long)
$600 - water heater
$ 450 - water tank
$600 - oven, dishwasher repair
$250 - paint
$3000 - landscaping
$6000 - insect damage / prevention (we live in pine beetle country & have to spray/thin each year.)
I would have never in my wildest dreams figure we would spend money like drunken sailors to keep up with this house.
_____________________________
“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: I want a house, but.. - 7/20/2010 7:17:57 PM
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iluvatar
Posts: 3543
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quote:
ORIGINAL: EsonTheSearcher
As I pointed out, if you get tired of your $2k a month (where on Earth do you live where renting a house is $2 a month?) you can just pack up and leave. And rent is usually cheaper, but all everyone thinks about is "I'm paying and don't on it..."
I balked a bit when I saw that at first, too.
Then I remembered what I pay for rent.
20 minutes outside of Boston, I pay $1400/mo for a 2br apt (half of a duplex) with a basement. This rent is on the cheap side for the area and the apt is nothing spectacular. $2000/mo for a legit house is not out of line for my area either. A good 45 minutes out of the city, I can get a 1br apt in a mediocre apt complex for $750-850/mo, depending on what floor I'd want to live on. In that same area, my old boss has a decent sized house and was looking to rent it out for something over $3K, IIRC.
-Dan.
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RE: I want a house, but.. - 7/20/2010 7:27:46 PM
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ColoradoLady38
Posts: 374
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From: Somewhere near Pikes Peak
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Wow, you guys had some great comments. I thank you for all of your replies. I definitely think it's not the best idea to buy a house. Especially considering the fact about all of the repair costs. I definitely need to save up money, to have my emergeny funds set. I am going to look in the area to see how much our rentals are for a 3 bedroom.
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RE: I want a house, but.. - 7/20/2010 8:34:53 PM
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christsstar
Posts: 2216
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quote:
ORIGINAL: GroupW
quote:
ORIGINAL: christsstar
It's the maintenance that would kill us. So we would really have to look at having maintenance costs available or make sure the house is pristine.
And even when you think it's pristine, you end up spending way more than you originally expected. Our house was built 9 years ago, but we've spent about $25k so far in maintenance over the past 6 years we've owned it.
$15,000 - refurbishing the deck (Colorado sun & UV is death to wood decks. Did synthetic. Cost 2x as much but will last 2x as long)
$600 - water heater
$ 450 - water tank
$600 - oven, dishwasher repair
$250 - paint
$3000 - landscaping
$6000 - insect damage / prevention (we live in pine beetle country & have to spray/thin each year.)
I would have never in my wildest dreams figure we would spend money like drunken sailors to keep up with this house.
We're waiting for the hot water heater to die!
The landlord approved a new deck right now.
Yes, Colo UV is awful. Lived there for 23 years, and remember helping my dad stain the deck summer after summer.
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RE: I want a house, but.. - 7/20/2010 9:34:01 PM
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GroupW
Posts: 2958
Joined: 11/16/2007
From: Up in the hills of Colorado (very BIG hills...)
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The myriad joys of home ownership!
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“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: I want a house, but.. - 7/20/2010 11:11:00 PM
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relady
Posts: 630
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From: Greater St. Louis Metro
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quote:
hink of buying a house as a lifestyle decision and not as an investment. YES! Homes do tend, over the long haul, to generally be a decent investment, but were never intended to be viewed as something short term to just buy and make money at. When you buy a home, buy one because you can afford it and because you WANT to own your own abode. There are lots of advantages to homeownership, many of them of personal intrinsic value not monetary. And there are some distinct drawbacks. Having both rented and owned, I would much rather own my own place.
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RE: I want a house, but.. - 7/21/2010 12:17:55 AM
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GroupW
Posts: 2958
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From: Up in the hills of Colorado (very BIG hills...)
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Having owned a few houses ...
Compared to the large ones with the big lawns and fancy landscaping that take hours each week to maintain, I would rather rent.
Compared to the smaller one I own that is relatively low maintenance, I would rather own.
It's a personal dysfunction - I hate, Hate, HATE lawn work and handyman stuff. I also stink rather badly at it.
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“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: I want a house, but.. - 7/21/2010 11:08:10 AM
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APZR
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From: GA
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When renting, one needs to also consider the additional cost of parking, if you live intown parking is not usually included in the rent, as well as other vending such as laundry. Yeah the cost of repairs in ownership can be a pain, but even if you are renting you are still paying for them... it's just over a longer term where the investor can recapture the cost. And tax laws have a lot of impact here too. I have one house where the rent is less than my cost, but the values are going up and I don't care. The rent loss is deducted from my personal income, and I'll have some very good capital gains when I do sell. That's another win/win for me as capital gains are not taxed as income, the rate is much lower. So if you just look at the cost of housing, you'll miss the economic gains I'll realize through playing the tax game. Granted though, I am in the biz and have made a good living in real estate for over 20 years, have more knowledge than the average buyer, and I never pay full market value for any real estate. Neither mine nor any other investor's professional experience can be calculated in any housing cost calculator. If it could, and the figures still showed a negative economic outlook, then there would be no properties to rent as investors would not place their cash in an economy where there is no profit motive. So in the end, it boils down we are both right!  It's personal choice, life style, and the level of knowledge or sophistication of the end consumer to be able to make wise economic choices over the long term. It's not unlike leasing VS buying cars... yes, it is better for some people to rent.
BTW, I actually enjoy yard work, it's my de-stresser at the end of the day. So I have a big fancy lawn with flower beds, fruit trees, and manicured turf. 
< Message edited by APZR -- 7/21/2010 11:18:08 AM >
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RE: I want a house, but.. - 7/21/2010 11:35:41 AM
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GroupW
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From: Up in the hills of Colorado (very BIG hills...)
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quote:
ORIGINAL: APZR
So in the end, it boils down we are both right!
Probably so. I included tax effects when I did my modeling, but the impacts are quite different for a long term primary residence vs investment property. Professional expertise plays a huge role as well.
quote:
ORIGINAL: APZR
So I have a big fancy lawn with flower beds, fruit trees, and manicured turf.
For me, I believe this is what happens to the unsaved after they die.
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“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: I want a house, but.. - 7/21/2010 11:54:47 AM
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Random
Posts: 813
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From: Zipperhead
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quote:
ORIGINAL: APZR
That's another win/win for me as capital gains are not taxed as income, the rate is much lower.
For now, anyway...
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RE: I want a house, but.. - 7/21/2010 12:07:50 PM
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Consecrated2God
Posts: 5176
Joined: 4/4/2005
From: Formerly Jesus Land
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Wow, for us owning is a lot cheaper than renting, but that's the part of the country we live in. Houses are dirt cheap here right now. We bought ours for $26,000 last year. Our monthly payment is about a third what it would cost us to rent a house this size. Sure, we had some repairs to do, but my husband is a handyman and can do it all himself. So I guess it just depends on your situation.
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